News - Page 39 of 42 - Dustin Kern, CPA, P.C.

Home-related tax breaks are valuable on 2017 returns, will be less so for 2018

Post author:admin
Post published:March 31, 2018
Post category:Personal Tax Tax Deduction

Home ownership is a key element of the American dream for many, and the U.S. tax code includes many tax breaks that help support this dream. If you own a home, you may be eligible for several valuable breaks when you file your 2017 return. But under the Tax Cuts and Jobs Act, your home-related breaks may not be as valuable when you file your 2018 return next year.

2017 vs. 2018

Here’s a look at various home-related tax breaks for 2017 vs. 2018:

Property tax deduction. For 2017, property tax is generally fully deductible — unless you’re subject to the alternative minimum tax (AMT). For 2018, your total deduction for all state and local taxes, including both property taxes and either income taxes or sales taxes, is capped at $10,000.

Mortgage interest deduction. For 2017, you generally can deduct interest on up to a combined total of $1 million of mortgage debt incurred to purchase, build or improve your principal residence and a second residence. However, for 2018, if the mortgage debt was incurred on or after December 15, 2017, the debt limit generally is $750,000.

Home equity debt interest deduction. For 2017, interest on home equity debt used for any purpose (debt limit of $100,000) may be deductible. (If home equity debt isn’t used for home improvements, the interest isn’t deductible for AMT purposes). For 2018, the TCJA suspends the home equity interest deduction. But the IRS has clarified that such interest generally still will be deductible if used for home improvements. (more…)

Can you claim your elderly parent as a dependent on your tax return?

Post author:admin
Post published:March 31, 2018
Post category:Personal Tax Tax Deduction

Perhaps. It depends on several factors, such as your parent’s income and how much financial support you provided. If you qualify for the adult-dependent exemption on your 2017 income tax return, you can deduct up to $4,050 per qualifying adult dependent. However, for 2018, under the Tax Cuts and Jobs Act, the dependency exemption is eliminated.

Income and support

For you to qualify for the adult-dependent exemption, in most cases your parent must have less gross income for the tax year than the exemption amount. (Exceptions may apply if your parent is permanently and totally disabled.) Generally Social Security is excluded, but payments from dividends, interest and retirement plans are included.

In addition, you must have contributed more than 50% of your parent’s financial support. If you shared caregiving duties with a sibling and your combined support exceeded 50%, the exemption can be claimed even though no one individually provided more than 50%. However, only one of you can claim the exemption.

Keep in mind that, even though Social Security payments can usually be excluded from the adult dependent’s income, they can still affect your ability to qualify. Why? If your parent is using Social Security money to pay for medicine or other expenses, you may find that you aren’t meeting the 50% test. (more…)

2018 Q2 tax calendar: Key deadlines for businesses and other employers

Post author:admin
Post published:March 31, 2018
Post category:Business Tax

Here are some of the key tax-related deadlines affecting businesses and other employers during the second quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

April 2

Electronically file 2017 Form 1096, Form 1098, Form 1099 (except if an earlier deadline applies) and Form W-2G.

April 17

If a calendar-year C corporation, file a 2017 income tax return (Form 1120) or file for an automatic six-month extension (Form 7004), and pay any tax due. If the return isn’t extended, this is also the last day to make 2017 contributions to pension and profit-sharing plans.
If a calendar-year C corporation, pay the first installment of 2018 estimated income taxes.

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Size of charitable deductions depends on many factors

Post author:admin
Post published:March 17, 2018
Post category:Personal Tax Tax Deduction

Whether you’re claiming charitable deductions on your 2017 return or planning your donations for 2018, be sure you know how much you’re allowed to deduct. Your deduction depends on more than just the actual amount you donate.

Type of gift

One of the biggest factors affecting your deduction is what you give:

Cash. You may deduct 100% gifts made by check, credit card or payroll deduction.

Ordinary-income property. For stocks and bonds held one year or less, inventory, and property subject to depreciation recapture, you generally may deduct only the lesser of fair market value or your tax basis.

Long-term capital gains property. You may deduct the current fair market value of appreciated stocks and bonds held for more than one year.

Tangible personal property. Your deduction depends on the situation:

If the property isn’t related to the charity’s tax-exempt function (such as a painting donated for a charity auction), your deduction is limited to your basis.
If the property is related to the charity’s tax-exempt function (such as a painting donated to a museum for its collection), you can deduct the fair market value.

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Make sure repairs to tangible property were actually repairs before you deduct the cost

Post author:admin
Post published:March 17, 2018
Post category:Business Tax Tax Deduction

Repairs to tangible property, such as buildings, machinery, equipment or vehicles, can provide businesses a valuable current tax deduction — as long as the so-called repairs weren’t actually “improvements.” The costs of incidental repairs and maintenance can be immediately expensed and deducted on the current year’s income tax return. But costs incurred to improve tangible property must be depreciated over a period of years.

So the size of your 2017 deduction depends on whether the expense was a repair or an improvement.

Betterment, restoration or adaptation

In general, a cost that results in an improvement to a building structure or any of its building systems (for example, the plumbing or electrical system) or to other tangible property must be depreciated. An improvement occurs if there was a betterment, restoration or adaptation of the unit of property.

Under the “betterment test,” you generally must depreciate amounts paid for work that is reasonably expected to materially increase the productivity, efficiency, strength, quality or output of a unit of property or that is a material addition to a unit of property.

Under the “restoration test,” you generally must depreciate amounts paid to replace a part (or combination of parts) that is a major component or a significant portion of the physical structure of a unit of property. (more…)

Casualty losses can provide a 2017 deduction, but rules tighten for 2018

Post author:admin
Post published:March 17, 2018
Post category:Personal Tax

If you suffered damage to your home or personal property last year, you may be able to deduct these “casualty” losses on your 2017 federal income tax return. For 2018 through 2025, however, the Tax Cuts and Jobs Act suspends this deduction except for losses due to an event officially declared a disaster by the President.

What is a casualty? It’s a sudden, unexpected or unusual event, such as a natural disaster (hurricane, tornado, flood, earthquake, etc.), fire, accident, theft or vandalism. A casualty loss doesn’t include losses from normal wear and tear or progressive deterioration from age or termite damage.

Here are some things you should know about deducting casualty losses on your 2017 return:

When to deduct. Generally, you must deduct a casualty loss on your return for the year it occurred. However, if you have a loss from a federally declared disaster area, you may have the option to deduct the loss on an amended return for the immediately preceding tax year.

Amount of loss. Your loss is generally the lesser of 1) your adjusted basis in the property before the casualty (typically, the amount you paid for it), or 2) the decrease in fair market value of the property as a result of the casualty. This amount must be reduced by any insurance or other reimbursement you received or expect to receive. (If the property was insured, you must have filed a timely claim for reimbursement of your loss.) (more…)

Sec. 179 expensing provides small businesses tax savings on 2017 returns — and more savings in the future

Post author:admin
Post published:March 1, 2018
Post category:Business Tax Deduction

If you purchased qualifying property by December 31, 2017, you may be able to take advantage of Section 179 expensing on your 2017 tax return. You’ll also want to keep this tax break in mind in your property purchase planning, because the Tax Cuts and Jobs Act (TCJA), signed into law this past December, significantly enhances it beginning in 2018.

2017 Sec. 179 benefits

Sec. 179 expensing allows eligible taxpayers to deduct the entire cost of qualifying new or used depreciable property and most software in Year 1, subject to various limitations. For tax years that began in 2017, the maximum Sec. 179 deduction is $510,000. The maximum deduction is phased out dollar for dollar to the extent the cost of eligible property placed in service during the tax year exceeds the phaseout threshold of $2.03 million.

Qualified real property improvement costs are also eligible for Sec. 179 expensing. This real estate break applies to:

Certain improvements to interiors of leased nonresidential buildings,
Certain restaurant buildings or improvements to such buildings, and
Certain improvements to the interiors of retail buildings.

Deductions claimed for qualified real property costs count against the overall maximum for Sec. 179 expensing.

Permanent enhancements (more…)

Female hand on steering wheel. Travel and safty concept.

What’s your mileage deduction?

Post author:admin
Post published:March 1, 2018
Post category:Business Personal Tax Deduction

Individuals can deduct some vehicle-related expenses in certain circumstances. Rather than keeping track of the actual costs, you can use a standard mileage rate to compute your deductions. For 2017, you might be able to deduct miles driven for business, medical, moving and charitable purposes. For 2018, there are significant changes to some of these deductions under the Tax Cuts and Jobs Act (TCJA).

Mileage rates vary

The rates vary depending on the purpose and the year:

Business: 53.5 cents (2017), 54.5 cents (2018)

Medical: 17 cents (2017), 18 cents (2018)

Moving: 17 cents (2017), 18 cents (2018)

Charitable: 14 cents (2017 and 2018)

The business standard mileage rate is considerably higher than the medical, moving and charitable rates because the business rate contains a depreciation component. No depreciation is allowed for the medical, moving or charitable use of a vehicle. The charitable rate is lower than the medical and moving rate because it isn’t adjusted for inflation.

In addition to deductions based on the standard mileage rate, you may deduct related parking fees and tolls.

2017 and 2018 limits (more…)

Tax deduction for moving costs: 2017 vs. 2018

Post author:admin
Post published:February 25, 2018
Post category:Personal Tax Deduction

If you moved for work-related reasons in 2017, you might be able to deduct some of the costs on your 2017 return — even if you don’t itemize deductions. (Or, if your employer reimbursed you for moving expenses, that reimbursement might be excludable from your income.) The bad news is that, if you move in 2018, the costs likely won’t be deductible, and any employer reimbursements will probably be included in your taxable income.

Suspension for 2018–2025

The Tax Cuts and Jobs Act (TCJA), signed into law this past December, suspends the moving expense deduction for the same period as when lower individual income tax rates generally apply: 2018 through 2025. For this period it also suspends the exclusion from income of qualified employer reimbursements of moving expenses.

The TCJA does provide an exception to both suspensions for active-duty members of the Armed Forces (and their spouses and dependents) who move because of a military order that calls for a permanent change of station.

Tests for 2017

If you moved in 2017 and would like to claim a deduction on your 2017 return, the first requirement is that the move be work-related. You don’t have to be an employee; the self-employed can also be eligible for the moving expense deduction.

The second is a distance test. The new main job location must be at least 50 miles farther from your former home than your former main job location was from that home. So a work-related move from city to suburb or from town to neighboring town probably won’t qualify, even if not moving would have increased your commute significantly. (more…)

Tax credit for hiring from certain “target groups” can provide substantial tax savings

Post author:admin
Post published:February 25, 2018
Post category:Business Tax

Many businesses hired in 2017, and more are planning to hire in 2018. If you’re among them and your hires include members of a “target group,” you may be eligible for the Work Opportunity tax credit (WOTC). If you made qualifying hires in 2017 and obtained proper certification, you can claim the WOTC on your 2017 tax return.

Whether or not you’re eligible for 2017, keep the WOTC in mind in your 2018 hiring plans. Despite its proposed elimination under the House’s version of the Tax Cuts and Jobs Act, the credit survived the final version that was signed into law in December, so it’s also available for 2018.

“Target groups,” defined

Target groups include:

Qualified individuals who have been unemployed for 27 weeks or more,
Designated community residents who live in Empowerment Zones or rural renewal counties,
Long-term family assistance recipients,
Qualified ex-felons,
Qualified recipients of Temporary Assistance for Needy Families (TANF),
Qualified veterans,
Summer youth employees,
Supplemental Nutrition Assistance Program (SNAP) recipients,
Supplemental Security Income benefits recipients, and
Vocational rehabilitation referrals for individuals who suffer from an employment handicap resulting from a physical or mental handicap.

Before you can claim the WOTC, you must obtain certification from a “designated local agency” (DLA) that the hired individual is indeed a target group member. You must submit IRS Form 8850, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit,” to the DLA no later than the 28th day after the individual begins work for you. Unfortunately, this means that, if you hired someone from a target group in 2017 but didn’t obtain the certification, you can’t claim the WOTC on your 2017 return. (more…)