With the change in the season and the return of fall, many people begin the act of making their homes less cluttered, and we will all begin to get donation requests in the mail. As the weather cools, we tend to turn an eye towards end of year tax moves as well. The Tax Cuts and Jobs Act of 2017 brought about many changes in how businesses and individuals are going to operate starting for 2018 onward. With the deviations to the itemized deductions that we are all so used to, rethinking your charitable giving is a must. Read more
Archive for Deductibles
If you’ve formed certain habits related to how you handle meals, entertainment, transportation, and parking as it relates to your business and taxes, the time to change those habits has come.
As this report notes, tax reform law commonly referred to as H.R. 1 Tax Cuts and Jobs Act of 2017 has changed the deductibility of certain meals, entertainment and transportation expenses. Before 2018, a taxpayer could deduct 50 percent of business meals and entertainment and 100 percent of meals provided through an in-house cafeteria or meals provided for the convenience of the employer (i.e., also known as a de minimis fringe benefit).
In an Information Release, IRS has announced that in many cases, taxpayers can continue to deduct interest paid on home equity loans under the recently enacted Tax Cuts and Jobs Act.
Taxpayers may deduct interest on mortgage debt that is “acquisition debt.” Acquisition debt means debt that is: (1) secured by the taxpayer’s principal home and/or a second home, and (2) incurred in acquiring, constructing, or substantially improving the home. This rule hasn’t been changed by the Tax Cuts and Jobs Act.
Under pre-Tax Cuts and Jobs Act law, the maximum amount that was treated as acquisition debt for the purpose of deducting interest was $1 million ($500,000 for marrieds filing separately). Under the Tax Cuts and Jobs Act, for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026, the limit on acquisition debt is reduced to $750,000 ($375,000 for a married taxpayer filing separately).
No matter the location, size, or value of a second home, certain tax advantages are built in. However, your opportunity to benefit from them depends on how you use the property.
Both property taxes and mortgage interest are as deductible for a second home as they are for your primary residence — and are subject to the same limitations. If you file a joint return, you cannot deduct interest on more than $1 million of acquisition debt ($500,000 for married persons filing separately) on one or two homes.
Two tax advantages of homeownership are not available for a second home — the immediate deduction of mortgage points when purchasing and the capital gain exemption when selling. Both tax breaks require the home to be your “principal residence.” However, you can deduct the points on your second home’s mortgage over the loan’s term.
At this time of year, a summer vacation is on many people’s minds. If you travel for business, combining a business trip with a vacation to offset some of the cost with a tax deduction can sound appealing. But tread carefully, or you might not be eligible for the deduction you’re expecting.
Business travel expenses are potentially deductible if the travel is within the United States and the expenses are “ordinary and necessary” and directly related to the business. (Foreign travel expenses may also be deductible, but stricter rules apply than are discussed here.)
Now that the effects of last year’s tax reform bill are being felt, the proposals to reform the reform keep rolling in. Last month, Sen. Bob Casey (D-PA) put forth a bill to reinstate unreimbursed job expenses. This week, Rep. Richard Nolan (D-MN) introduced H. R. 5662, also known as the Volunteer Driver Tax Appreciation Act of 2018.
The purpose of the bill is to amend the Internal Revenue Code of 1986 to equalize the charitable mileage rate with the business travel rate. For 2018, the Internal Revenue Service (IRS) optional standard mileage rates for the use of a car, van, pickup or panel truck are 54.5 cents per mile for business miles driven but a mere 14 cents per mile driven in service of charitable organizations.
Whatever the location, size, or value of a second home, certain tax advantages are built in. However, your opportunity to benefit from them depends on how you use the property.
Both property taxes and mortgage interest are as deductible for a second home as they are for your primary residence — and are subject to the same limitations. If you file a joint return, you cannot deduct interest on more than $1 million of acquisition debt ($500,000 for married persons filing separately) on one or two homes. Read more
November kicks off the season of giving, and the donations you make to your favorite charities may also provide you some tax benefits. However, there are some guidelines you should keep in mind as you write those checks.
In order for alimony payments made under pretrial order to be deductible (for Adjusted Gross Income) and taxable to the ex-spouse, the following conditions must be met:
(1) Payments must be made in cash
(2) Payments are received under a divorce or separate maintenance court decree
(3) The divorce or separation agreement does not designate the payment as something other than alimony (for example, a property settlement)
(4) The payer spouse and recipient spouse are not members of the same household at the time the payments are made
(5) There is no requirement to make the payments after the payer or recipient’s death.