Tax Benefits of Owning a Home

Besides the social privileges and freedom owning a home provides, there are tax advantages to home ownership. Homeowners who are wondering what tax incentives are available, and if there is a new home owner’s tax credit will find a recent post on the American Tax Service very informative. The post summarizes some of the benefits as well as the tax changes from the Tax Cuts and Jobs Act of 2018 that will affect all taxpayers filing as a new home buyer.

There are new major changes in the tax law that homeowners should be aware of. First, the total cap on the mortgage interest rate deduction has been lowered to $750,000 from $1,000,000. The second big change sees the standard deduction doubled. For individual filers, the amount is now $12,000 and it’s up to $24,000 for married couples. There is now a big possibility that the standard deduction might make the mortgage interest deduction now inconsequential on lower-priced homes.

The “First-Time Homebuyer credit” which was up to $7,500 for first-time homebuyers is now expired. And unless taxpayers had their home between 2008 and 2010, they are not eligible for this credit. Taxpayers can, however, claim buying a new house on their taxes. They will not be able to claim the costs of the closing process, but, they can claim any costs associated with mortgage interest, taxes, and insurance costs depending on the exact filing situation. This is capped at a total amount of $750,000 for married filers.

When buying a home, there are a number of fees and taxes applied through the closing process beyond the principal amount paid on the home. Only the taxes associated with the house are going to be eligible for a deduction. Capital gains tax are also a concern when selling a home.

For a clearer understanding of the whole process, please read the full post on American Tax Service here, https://americantaxservice.org/new-homeowners-tax-credit/

How to Claim the Medical Expense Tax Deductions

American taxpayers are allowed to deduct a certain amount of medical expenses from their taxes. But, these medical expenses are one of those tax deductions that have always been a bit complicated to calculate. In a new post, the National Tax Reports reveals which medical expense tax deductions taxpayers can take advantage of in 2018, how they work, how they are deducted from taxes, and which expenses can be deducted by hourly workers and self-employed.

The Medical tax deduction is quite different from other tax deductions. There is a ceiling where taxpayers can only deduct qualified medical expenses if they total more than 7.5% of their adjusted gross income for the years 2017 and 2018. From 2019, which will be reflected in the 2020 tax return, this amount goes up to 10% of adjusted gross income.

To estimate the Medical Tax Deduction, the first step is to calculate one’s adjusted gross income. This is one’s taxable income minus deductions, traditional IRA contributions, and any student loan interest one might have. Aside from the adjusted gross income, the IRS is also specific about the qualifying medical expenses. Some of the most common qualifying medical expenses include; preventive care, surgery treatments, dental care, vision care, prescriptions, visits to psychiatrists and psychologists, and travel expenses such as car mileage and parking fees. Medical premiums are also tax deductible but must be paid from the taxpayer’s own pocket.

The easiest way to claim the Medical Tax Deduction is by using TurboTax. Taxpayers will need to attach Schedule A and itemize their deductions. When itemizing expenses, filers will need to write down your adjusted gross income, enter 7.5% of this figure, and the difference between their expenses and the 7.5% they just wrote down. They are also expected to add any standard deductions that they are entitled to.

TurboTax removes much of the complexity involved with figuring out medical expenses and which deductions filers are entitled to. It’s also much more cost-effective than hiring an accountant and a tax-preparer!

File your taxes today with TurboTax in minutes and have peace of mind this tax season!

For more information about the Medical Expense Tax Deduction, please read the full post here, https://nationaltaxreports.com/what-are-medical-expense-tax-deductions/

Educational Tax Deductions and Credits

The cost of education is always rising. However, if you are someone who wants to grow your knowledge base you will be happy to know that education tax deductions and credits can help education tax deduction credityou with the costs of your education.

One of the tax credits is the American Opportunity Credit and another is the Lifetime Learning Credit. These credits allow you to reduce your tax dollars, dollar for dollar when you claim educational expenses on your federal tax refund.

American Opportunity Credit

This credit allows you to reduce your taxes up to a maximum of $2,500 per student for the educational expenses endured for the first four years. However, students have to attend at least part time and not have been convicted of a felony drug crime.

Various things qualify for this tax credit such as books, equipment, supplies, tuition, and other school related fees. In the event that your taxes are less than $2,500, the refund cut off amount is $1,000. However, those who make more than $80,000 or couples who make more than $160,000 will receive a low credit amount. The phase out limit for the credit is $90,000 in income or $180,000 for couples.

Lifetime Learning Credit

You do not have to be actively pursuing a degree in order to claim this credit. This credit is for anyone who is taking a course to further his or her education. It covers required tuition, equipment, and books. It allows you to claim a maximum amount of $2,000 on each tax return however; if the amount granted is more than your tax bill, you will not receive a credit in the form of a refund.

Additionally, the phase out limit is $63,000 or $127,000 for couples. Those who make more than $53,000 or couples who make more than $107,000 will receive a lower credit amount.

Educational Tax Deduction

Tuition and fees deduction, student loan interest, work related education, scholarships and fellowships can allow you to ease some of your educational financial strains too.

Tuition and Fees Deduction

If you are unable to claim the Lifetime Learning Credit because of the phase out limit, you can claim the Tuition and Fees Deduction of up to $4,000. This is true even for taxpayers who do not itemize their tax returns. As long as you do not make more than $80,000 or $160,000 for couples you are eligible. However, you are unable to claim both a credit and a deduction simultaneously.

Student Loan Interest

Even if you do not itemize your deductions, you can deduct your student loan interest on your taxes. This deduction does not phase out until $2,500 per tax return. However, you must not exceed $60,000 in income or $125,000 if you are married. Furthermore, if you have cash in a US savings bonds to pay for your education the interest is tax-free as long as the cash is used for your education.

Work Related Education

If you are going back to school due to your job, you may be eligible to claim this itemized tax deduction. However, you have to prove that the education was to maintain or improve your work skills or a requirement from your employer. However, this deduction is not for those who have to do it to land a new career.

Scholarships and Fellowships

If you receive a scholarship or a stipend for a fellowship, it is tax-free if you use the funds for tuition, supplies, or other school related expenses. You do have to be a degree candidate though.

Posted by Frank Ellis
Examiner.com, Tax Preparation
Website, http://bestirstaxrefund.com/