If you are one of the millions of Americans who own your own home, you should be thinking about how President Trump’s latest tax bill helps or dents your finances; particularly when it comes to the ever-popular mortgage interest deductions. This article should put you ahead of the subject.
First off, if you are a homeowner with no intentions of changing anything soon, your mortgage deductions are unaffected (with a couple of exceptions we deal with below).
The new laws apply only to those buying a home after 15th December 2017. If you fall into this category it boils down to understanding 3 key items:
- There’s a cap of $750,000 (previously $1 million) on your total mortgage value (covering private and secondary homes in aggregate) that qualifies for interest deduction.
- Discussing interest rate deduction on new home purchase goes hand-in-hand with the cap placed on Property Tax Deduction – now set at $10,000 (previously unlimited).
- The Standard Deduction has been nearly doubled for all categories of tax filers in 2018 onward.
Logically, anyone who intends buying in expensive locations or/and locations with property taxes above $10,000 should stop to think about it:
- High property prices of course generally call for higher mortgage financing, And it often happens that premium locations are also the ones with the highest real estate taxes – a double whammy effect if you will.
- In situations like this, it seems that the traditional enthusiasm around interest rate deductions may become somewhat jaded. It gives a whole new meaning to the popular realtor’s mantra, “location, location, location!”
The one escape hatch is to simply forget about itemizing interest payment and property tax claims; go to the expanded Standard Deduction now provided. But then again, the apparently increased relief offered by this new provision should be viewed alongside the knowledge that individual personal exemptions have been removed – which brings family size into the equation. If you have a lot of dependents (e.g. children or elderly parents) you may find yourself after all is said and done unchanged – or worse still, going backward.
Here’s another curveball that throws the cat amongst the pigeons: irrespective of when you bought or intend to buy your home/ homes (i.e. before or after the December 2017 law, it’s all the same) interest on second mortgages and on mortgages attached to unrented vacation residences is no longer deductible. Period. Given this, and all the other considerations are drawn into the conversation (as outlined above), it is impossible to provide a quick “catch-all” solution on interest rate deductibility. We can say this, however:
- It is likely there’ll be a homebuyer movement away from expensive property purchases for the foreseeable future, resulting in a growing tendency to relocate to tax-friendlier regions.
- The upper-middle class homebuyers will need to analyze these new tax provisions with a fine toothcomb, and even consider renting out vacation homes for part of the year to bring interest rate deduction back into the equation.
- Those buying at home prices under the $750,000 cap limit with under-$10,000 property tax limits should have a far easier passage.
Conclusion: It’s at times like this that astute tax advice paves the way forward and dispels doubt. As you can see there are numerous considerations, especially for larger families and those fortunate enough to own more than one home. Also, those on the cusp of relocating should be looking at all the variables as well as state taxes before making the move. Our team is geared to answer your questions on every aspect of real estate related deductions. Contacting us sooner than later may be the wisest decision you can make this year.
‘Tis the season for making resolutions and setting goals. Try exploring these three areas to dig deeper into QuickBooks Online.
By now, many New Year’s resolutions have already been made – and broken. Though they’re usually created with the best of intentions, they’re often just too ambitious to be realistic.
For example, you might decide to learn more about QuickBooks Online and keep up with your accounting chores more conscientiously in 2019. That’s hard to quantify. How will you know if you achieved that goal?
Instead, why not pick three (or more) specific areas and focus on them this month? We’ll get the ball rolling for you by making some suggestions.
Explore the QuickBooks Online mobile app:
Yes, QuickBooks Online itself is already mobile; you can access it from any computer that has an internet connection and browser. But you probably don’t always lug a laptop around when you’re away from the office, and you’re sometimes at locations were using it wouldn’t be practical. But you can always pull out your smartphone and fire up the QuickBooks Online app, available for both iOS and Android.
No matter how small your smartphone (this image was captured on an iPhone SE), you can still do your accounting tasks using QuickBooks Online’s app.
QuickBooks Online’s app replicates a surprising percentage of the features found on the browser-based version. You can create, view, and edit invoices, estimates, and sales receipts for example, as well as see abbreviated customer and vendor records. Your product and service records are available there, including tools for recording expenses on the road.
Create a budget for one month:
Budgets are intimidating. That’s one reason why some small businesses don’t create them. So instead of trying to estimate what your income and expenses will be for an entire fiscal year, just build a budget for one month. In QuickBooks Online, you’d click the gear icon in the upper right, then select Budgeting. Click Add budget in the upper right to open the New Budget window.
Give it a name, like “February Budget,” and select FY2019. Leave the Interval at Monthly, and open the Pre-fill data? menu to click on Actual data – 2018 (if you have data from last year). Then click Create Budget in the lower right corner. Look at last year’s February numbers and estimate how they might change in 2019. Replace the old numbers with your new ones.
Creating a framework for a budget in QuickBooks Online is easy.
We’re suggesting you try it for just one month, so you get a feel for how this tool works. And that experiment will probably leave you with some questions. We can help you go further and complete an annual budget.
Customize your sales forms:
Every piece of paper and email you send to your customers contributes to their impression of you. Are you presenting an attractive, consistent image of your business to them? QuickBooks Online can help with this. It offers simple (for the most part) tools that allow you to modify the boilerplate forms offered on the site – without being an experienced graphic designer.
Start by clicking on the gear icon in the upper right and selecting Your Company | Custom Form Styles. Unless you’ve done some work in this area before, the screen that opens will have just one listed entry: your Master form, the one that comes standard in QuickBooks Online. To see what you can do, click Edit at the end of that line. Your four options are:
- Design. This section contains links to modifications you can make to your sales forms’ visuals. You can, for example, add a logo or color and change the default fonts.
Want to change your logo or other elements of your sales forms? QuickBooks Online has the tools.
- Content. Do you want to add or remove the standard columns (Date, Quantity, etc.) displayed on your invoices? You can do so by checking and unchecking boxes.
- Emails. QuickBooks Online sends email messages with forms; you can edit them here.
- Payments. This is a reminder that QuickBooks Online supports online payments, which can help you get paid faster.
There’s more you can do to make your sales forms look professional and polished. We can help you with these tools – and any others you want to explore to expand your use of QuickBooks Online. It’s a new year, and who knows what might come your way over the next 12 months? Contact us if you want to prepare for the new accounting challenges that 2019 might present.
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Did you resolve to grow your understanding of QuickBooks Online in 2019? We can help you explore new features.
Go mobile in 2019: Download the QuickBooks Online app for your smartphone. You’d be surprised at how much it can do for you while you’re on the go.
How are things going with your 2019 budget? If you don’t have one yet, let us show you how QuickBooks Online simplifies this critical task.
QuickBooks Online’s sales forms (like invoices) may work fine for you. Do you know, though, how they can be customized to fit the image of your business? Ask us.
It’s a gig economy. QuickBooks Online makes it easy to track and pay independent contractors.
In days past we used to call it “moonlighting” – taking on a second, part-time job for extra money. And we saw how prevalent this became was when millions of people had to resort to side gigs to keep afloat during the economic downturn of a decade ago. Some who had lost full-time employment even turned one or more of these part-time passions into a small business and became independent contractors for other companies.
If you’re thinking of hiring a freelancer to do some of your work, you’ll find that QuickBooks Online can accommodate your accounting needs for them nicely. Since they’re not W-2 workers, your paperwork needs are minimal. They’ll simply fill out an IRS Form W-9 and you’ll pay them for services provided, dispatching 1099-MISCs after the first of each year so they can pay their taxes.
Here’s how it works.
Creating Contractor Records
Warning: Be sure that any independent contractor you hire cannot be considered an actual employee. The IRS spells out the differences very clearly and takes this distinction very seriously. If you have any doubts, we can help you determine your new worker’s status.
You can either let a new contractor complete his or her own profile or do so yourself.
Like you would with anyone you employ, you’ll need to create records for contractors in QuickBooks Online. Click on Workers in the left navigation pane, then Contractors | Add a contractor. In the window that opens, enter the individual’s name and email address. If you want the contractor to complete his or her own profile, click on the box in front of Email this contractor…
Your contractor will receive an email with an invitation to create an Intuit account and enter W-9 information, which will be transmitted to your QuickBooks Online company account. This will make it easy to process 1099s when tax season arrives. He or she will also be able to use QuickBooks Self-Employed, an Intuit website designed for freelancers. We can walk you through how this works.
If you’d rather enter the worker’s contact details yourself, leave the box blank. A vertical panel containing fields for this information will slide out from the right.
Contractors are also considered vendors. So when you create a record for a contractor, it will also appear in your Vendors list in QuickBooks Online. In fact, you can complete a contractor profile by clicking Expenses in the left vertical pane, then Vendors. Click New Vendor in the upper right and fill in the relevant fields there. Be sure to check the box in front of Track payments for 1099. An abbreviated version of your new record will also be available on the Contractors screen as the two are synchronized.
When you create a Vendor record for an independent contractor, be sure to check the Track payments for 1099 box.
Working with Contractors
You’ll notice in the screenshot above that Brenda Cooper had an Opening balance of $2,450 when you created her record. That’s money you already owed her, and for which she had probably sent you an invoice. QuickBooks Online turned that into an Accounts Payable item that you could find in multiple reports and on both the Vendors and Expenses screens. It will be listed as a Bill in reports, though you haven’t actually created one yet.
You have three options here. You can create a Bill and fill in any missing details if you don’t plan to pay Brenda immediately. If you want to send her the money right away, you can either enter an Expense or write a Check. There are many places in QuickBooks Online where you can do the latter two. We think it’s easiest to return to the Contractors screen since you can accomplish all three from there.
The Contractors screen contains links to the three ways you can handle compensation due to a contractor.
Whenever you receive an invoice from a contractor, you can visit this same screen and choose one of the three options.
You’ll have to select a Category for your payment from the list provided in each of these three types of transactions. The Chart of Accounts contains one called Subcontractors, which may or may not work for your purposes.
We strongly encourage you to consult with us as you begin the process of managing independent contractor compensation to deal with this issue as well as others. QuickBooks Online offers multiple ways to get to the same end result, and it can be confusing. Contact us, and we can schedule a consultation.
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Hiring independent contractors? Be sure they should be classified as such, and not employees. We can help you determine how to do this.
QuickBooks Online offers many ways to do the same tasks when you’re working with independent contractors. Here is how we can help you figure this out.
There are three ways to record financial obligations to independent contractors: bill, check, and expense. Do you know the differences? We can help you figure this out.
Though you don’t have the same payroll requirements for contractors as you do employees, it’s very important to get it right. Here are a few ways we can help you with this.
If you are getting a divorce, taxes are probably not highest on your list of concerns. Still, you should consider a number of tax-related issues.
Dividing property in connection with divorce generally has no immediate consequences for either spouse. However, if the spouse who receives property in the divorce settlement later sells it, there may be again to report for tax purposes. So, potential taxes should be a consideration in deciding which spouse will receive which property.
Note that a spouse who receives property in a divorce figure any gain on a subsequent sale of the property using the transferring spouse’s basis (e.g., cost), not the property’s value when it was received.
For example, Michelle receives 10 acres of unimproved land in her divorce settlement. Her ex-husband bought the land for $25,000. It’s now worth $100,000. If Michelle sells the land for $100,000, she will have to report a taxable gain of $75,000 (the difference between the $100,000 selling price and the $25,000 cost basis).
If a divorcing couple sells their home while they are still married, they are entitled to exclude up to $500,000 of gain from their taxable income if otherwise eligible for the exclusion. If the ownership of the home is simply transferred to one spouse as part of the divorce settlement, there is no taxable gain or loss at the time of transfer. However, should that spouse later sell the house while he or she is unmarried, only a $250,000 exclusion would be available.
A divorce settlement often determines how retirement plan benefits will be divided. However, an employer may distribute retirement plan benefits to a former spouse only after receiving a court-issued document that meets the requirements for a qualified domestic relations order (QDRO). The benefits are taxable to the former spouse who receives them pursuant to a QDRO.
The Tax Cuts and Jobs Act of 2017 suspended the deduction for dependency exemptions for 2018 through 2025. But after 2025, the deduction will apply (unless additional changes are made). While the spouse who has legal custody of a child is generally entitled to claim the dependency exemption, this tax advantage is negotiable and can change from year to year. The custodial spouse can waive his or her right to the exemption, allowing the noncustodial spouse to claim it.
Other Tax Benefits
Having a child qualify as a dependent may impact other tax benefits. For example, there is a potential child tax credit of up to $2,000 annually for each qualifying dependent child under age 17.
Alimony vs. Child Support
For 2018, payments that qualify as alimony under the tax law are deductible by the paying spouse and are considered taxable income to the recipient spouse. Child support payments, on the other hand, are not deductible by the paying spouse and are not included in the recipient spouse’s income. The IRS characterizes payments that are linked to an event or date relating to a child — such as high school graduation or a 21st birthday — as child support rather than alimony.
Note that the tax treatment of alimony will be different for taxpayers who divorce after 2018. Under the Tax Cuts and Jobs Act of 2017, no deduction is available for alimony payments made under post-2018 divorce or separation agreements and recipients are not required to include the payments in income.
These are just some of the tax planning issues that could be important in a divorce situation. Be sure to consult your tax and legal advisors to discuss how these general rules pertaining to your personal situation.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).
If you’re one of the millions of American households who own either a traditional individual retirement account (IRA) or a Roth IRA, then the onset of tax season should serve as a reminder to review your retirement savings strategies and make any changes that will enhance your prospects for long-term financial security. It’s also a good time to start an IRA if you don’t already have one. The IRS allows you to contribute to an IRA up to April 15, 2019, for the 2018 tax year.
This checklist will provide you with information to help you make informed decisions and implement a long-term retirement income strategy.
Which Account: Roth IRA or Traditional IRA?
There are two types of IRAs available: the traditional IRA and the Roth IRA. The primary difference between them is the tax treatment of contributions and distributions (withdrawals). Traditional IRAs may allow a tax deduction based on the amount of a contribution, depending on your income level. Any account earnings compound on a tax-deferred basis and distributions are taxable at the time of withdrawal at then-current income tax rates. Roth IRAs do not allow a deduction for contributions, but account earnings and qualified withdrawals are tax-free .1
In choosing between a traditional and a Roth IRA, you should weigh the immediate tax benefits of a tax deduction this year against the benefits of tax-deferred or tax-free distributions in retirement.
If you need the immediate deduction this year — and if you qualify for it — then you may wish to opt for a traditional IRA. If you don’t qualify for the deduction, then it’s almost certainly a better idea to fund a Roth IRA.
Case in point: Your ability to deduct traditional IRA contributions may be limited not only by income but by your participation in an employer-sponsored retirement plan. (See callout box below.) If that’s the case, a Roth IRA is likely to be the better solution.
On the other hand, if you expect your tax bracket to drop significantly after retirement, you may be better off with a traditional IRA if you qualify for the deduction. You could claim an immediate deduction now and pay taxes at the lower rate later. Nonetheless, if your anticipated holding period is long, a Roth IRA might still make more sense. That’s because a prolonged period of tax-free compounded earnings could more than makeup for the lack of a deduction.
|Traditional IRA Deductible Contribution Phase-Outs|
|Your ability to deduct contributions to a traditional IRA is affected by whether you are covered by a workplace retirement plan.
If you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA will be reduced (phased out) if your modified adjusted gross income (MAGI) is:
If you are not covered by a retirement plan at work but your spouse is covered, your 2017 deduction for contributions to a traditional IRA will be reduced if your MAGI is between $189,000 and $199,000.
If your MAGI is higher than the phase-out ceilings listed above for your filing status, you cannot claim the deduction.
|Roth IRA Contribution Phase-Outs|
|Your ability to contribute to a Roth IRA is affected by your MAGI. Contributions to a Roth IRA will be phased out if your MAGI is:
If your MAGI is higher than the phase-out ceilings listed above for your filing status, you cannot make a contribution.
Should You Convert to Roth?
The IRS allows you to convert — or change the designation of — a traditional IRA to a Roth IRA, regardless of your income level. As part of the conversion, you must pay taxes on any investment growth in — and on the amount of any deductible contributions previously made to — the traditional IRA. The withdrawal from your traditional IRA will not affect your eligibility for a Roth IRA or trigger the 10% additional federal tax normally imposed on early withdrawals.
The decision to convert or not ultimately depends on your timing and tax status. If you are near retirement and find yourself in the top income tax bracket this year, now may not be the time to convert. On the other hand, if your income is unusually low and you still have many years to retirement, you may want to convert.
If possible, try to contribute the maximum amount allowed by the IRS: $5,500 per individual, plus an additional $1,000 annually for those age 50 and older for the 2018 tax year. Those limits are per individual, not per IRA.
Of course, not everyone can afford to contribute the maximum to an IRA, especially if they’re also contributing to an employer-sponsored retirement plan. If your workplace retirement plan offers an employer’s matching contribution, that additional money may be more valuable than the amount of your deduction. As a result, it might make sense to maximize plan contributions first and then try to maximize IRA contributions.
Review Distribution Strategies
If you’re ready to start making withdrawals from an IRA, you’ll need to choose the distribution strategy to use: a lump-sum distribution or periodic distributions. If you are at least age 70½ and own a traditional IRA, you may need to take required minimum distributions every year, according to IRS rules.
Don’t forget that your distribution strategy may have significant tax-time implications if you own a traditional IRA because taxes will be due at the time of withdrawal. As a result, taking a lump-sum distribution will result in a much heftier tax bill this year than taking a minimum distribution.
The April filing deadline is never that far away, so don’t hesitate to use the remaining time to shore up the IRA strategies you’ll rely on to live comfortably in retirement.
1Early withdrawals (before age 59½) from a traditional IRA may be subject to a 10% additional federal tax. Nonqualified withdrawals from a Roth IRA may be subject to ordinary income tax as well as the 10% additional tax.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v
If you are a volunteer board member for a nonprofit organization, one specific issue to keep in mind is the IRS’s trust fund recovery penalty. If any entity — nonprofit or for-profit — fails to properly remit Social Security taxes and/or income taxes withheld from employees’ wages, the IRS will directly approach the organization’s “responsible persons” for the tax payments and a potential 100% penalty… Learn about nonprofit bookkeeping at this Dave Burton article.
In general, the penalty will not be imposed on any unpaid, volunteer member of the board of a tax-exempt organization if the member: (1) is solely serving in an honorary capacity, (2) does not participate in the day-to-day operations of the organization, (3) does not participate in the financial operations of the organization, and (4) does not have actual knowledge of the failure on which the penalty is based.
However, for an active member who has governing responsibilities, it is still important to ask questions about who is handling these tax payments (a staff member, the executive director, a payroll service, an accountant?) and what checks and balances are in effect to make sure no problems arise. Annual reviews or audits may also be helpful to verify compliance.
To learn more about non-profit compliance issues, give us a call today. We look forward to helping your non-profit grow.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v
Nonprofit organizations exempt from tax under Section 501(c)(3) of the federal tax code — schools, religious groups, hospitals, social service providers, and other public charities — should be careful not to violate the law’s prohibition on political campaign activities.
Participation or intervention in a political campaign on behalf of, or in opposition to, a candidate for public office is absolutely prohibited, whether it’s done directly or indirectly. This restriction applies across the board to campaigns of candidates running for national, state, or local public office.
Examples of prohibited political campaign activities include:
> Endorsing a candidate
> Donating to a candidate’s campaign
> Allowing a candidate to make a campaign speech at an organization-sponsored event
> Allowing a candidate to use an organization’s assets or facilities if other candidates are not given an equivalent opportunity
> Distributing materials that favor or oppose a candidate (whether the statements are prepared by others or by the organization)
> Posting comments about a candidate on the organization’s website or maintaining a link to only one candidate’s profile on the site
An organization may educate voters as long as it’s done in a nonpartisan, unbiased way. For example, organizations may prepare and distribute voter education guides or hold public forums. But all candidates seeking the same office should have an equal opportunity to be represented or participate. Neutrality — in content, wording, questioning, issues for discussion, etc. — is key.
Board members and other leaders of an organization may, of course, hold their own political views. But when they express those views, they should make it abundantly clear they are speaking for themselves, not on behalf of the organization. Leaders should avoid making political statements at organization meetings. Similarly, the organization’s resources or publications should not be used to express political views.
A charity may conduct educational activities regarding public policy issues of importance to its mission, including issues that divide candidates in an election for public office. However, messages that could be construed as political campaign intervention should be avoided.
Failure To Comply
Violating the prohibition on political campaign activities can result in revocation of an organization’s tax-exempt status and the imposition of certain excise taxes.
To learn more about non-profit compliance issues, give us a call today. We look forward to helping your non-profit grow.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v
Critical Choices: How the Business Entity You Select Impacts Your Taxes
Entrepreneurs have a long list of special opportunities to save on taxes. However, your eligibility for some tax breaks depends on the decisions you make as you are planning and launching your business. One of the most critical choices is which business entity you will operate under. The Amazon Best Selling book, The Great Tax Escape, walks you through each of your options, spelling out the benefits and drawbacks of the most common business structures.
Business Entity Basics
It’s no surprise that you must pay taxes on any income your business generates, but you might not realize that the same income can be taxed differently depending on how your business is organized. While some types of businesses are considered separate taxpayers from their owners, others require that you include your business income on your personal tax returns.
Your tax rates aren’t the only thing impacted by your choice of business entity. The structure you select affects whether you are personally responsible for business debts and whether you can be held personally liable if the business is sued. When your business exists as a separate entity, the business itself can apply for credit, and these types of businesses can continue to operate when you decide to move on or retire, you should check the circumstances where people get a payday loan by negosentro to see if a business is one of them.
These are a few of the most common options:
Sole Proprietorships and Partnerships
When you are starting out and working alone, it is easy to operate as a sole proprietorship. Essentially, you and your businesses are one and the same for tax and legal purposes. Simply register your business name with the state, and you are ready to launch. You can still have employees as a sole proprietor, but you own the entire company.
The simplicity of this structure makes it quite popular, but it isn’t always the best choice for entrepreneurs. Business income is treated the same way as other personal income for tax purposes, and you assume full liability for all business debts and legal issues. That puts your personal assets at risk.
Though there is slightly more paperwork involved, a partnership is quite similar to a sole proprietorship. Taxes and legal liability are the responsibility of all partners, and partners can be sued individually or collectively for the actions of one business owner.
Limited Liability Companies (LLC)
It is common to see initials LLC after many small and medium-sized business names, and there is a good reason for that. LLCs offer business owners many of the protections that larger corporations enjoy, without the complexity and cost associated with incorporation. With LLCs, business owners are considered separate from the business itself for the purpose of taxation and legal liability. This can lead to significant tax savings, and it protects personal assets from business-related debts and lawsuits.
Of course, setting up an LLC is more complicated than operating as a sole proprietor, so some entrepreneurs choose to hold off on this step until the business begins to be profitable. Your choice of business entity can dramatically impact your bottom line tax bill, and it will affect your long-term level of risk as the organization grows. To learn more about your options for structuring your business, contact us today!
Tax-Saving Tips for LGBT Couples
The issues around marriage equality caused lots of debate, but it was federal tax laws that finally prompted the Supreme Court to take a look. Prior to the 2013 United States v. Windsor decision, same-sex couples who were legally married in states or countries that recognized their union were unable to take advantage of certain federal benefits. For example, individuals in same-sex marriages were ineligible for the insurance benefits of their spouses who worked in government, and they could not receive social security survivor’s benefits or file joint tax returns.
The 2013 United States v. Windsor decision and the 2015 Obergefell v. Hodges decisions changed these practices, and LGBT couples became eligible for federal tax savings that were previously unavailable. The Amazon Best Selling book, The Great Tax Escape, offers a comprehensive look at making the most of these programs to enjoy greater tax savings.
Choosing Your Filing Status
The first tax-related issue to consider after you are married is how you will file your returns. Depending on your income, “married filing separately” could offer larger savings than “married filing jointly”. There is a phenomenon knows as “the marriage penalty”. This references the tax increase that many couples face when filing joint returns versus single returns.
Tax specialists can assist with significantly reducing tax liability through a combination of smart financial planning, examination of the impact of each filing status, and a review of all possible deductions. Filing status is expected to be particularly relevant for the 2018 tax year, as new tax regulations with revised tax brackets may reduce or eliminate the marriage penalty.
Quick Tips to Avoid Tax Filing Pitfalls
Completing your tax returns after you are married is not necessarily more complicated than filing as single, but there are a few differences to keep in mind. Small errors can lead to major frustration if your returns are rejected or you have to file an amended form. These are the most common pitfalls – and how to avoid them:
- You must either choose “married filing jointly” or “married filing separately”. Other filing statuses are not permitted, including “head of household”. (Note: There is an exception available for married couples who have lived apart for six months or more.)
- Your spouse cannot be listed as your dependent.
- If you choose “married filing separately”, only one spouse can claim each dependent child.
- Married couples must choose the same option with regard to itemizing deductions versus claiming the standard deduction.
Your Certified Tax Coach can provide the guidance you need to complete your returns correctly.
New Options for Reducing Estate Taxes
The underlying issue that prompted United States v. Windsor was the application of federal estate tax regulations. In short, married couples pay far less when a spouse dies than they would if no marriage existed. The individual who brought the suit wanted the same benefits as married couples who are opposite-sex. Today, all married couples can enjoy the tax savings that come with careful estate planning. Your Certified Tax Coach is an excellent resource for putting a tax minimization strategy in place to protect your wealth after one partner passes away.
For more tips on how LGBT couples can increase tax savings, visit our consultation form for your copy of our new release, The Great Tax Escape.
Quick Tips for Tax Savings: Physician Edition
Doctors offer critical services to the community through prevention and treatment of health issues that can lead to patients needing Home Care Assistance. However, getting the necessary education and experience can be challenging – both physically and financially. In an effort to make life a bit easier for physicians, lawmakers have put together a variety of programs to reduce tax liability for doctors. Maximizing these opportunities in combination with other tax-reduction strategies can dramatically increase the rewards of working as a healthcare provider. The Amazon Best Selling book, The Great Tax Escape, includes in-depth information on taking advantage of these tax savings techniques. Learn how to get a free copy of The Great Tax Escape here.
Small Changes Add Up to Big Savings
It may not be possible to implement all available tax savings strategies at once, but making small changes in managing your practice quickly adds up. Over time, continue to add layers of savings by implementing additional strategies. Before long, you will see your tax bill go down, even when your income is going up. These are just a few of the tips you will learn more about in The Great Tax Escape.
The Case for Specialized Financial Professionals
Free and low-cost budgeting and financial planning tools are great for those with basic financial situations. However, your position as a practicing physician is too complex for these platforms. Enlist a team of professionals with specific experience in tax issues that affect health care providers. Not only will they help you save your money more effectively – they will also assist you in planning major purchases to minimize tax expenses. Long-term, you are likely to realize a significant return on this investment.
Common Deductions You Probably Aren’t Maximizing
Though you are already aware of many deductions available to you, it is likely that you are not yet getting the maximum tax savings you are entitled to. For example, continuing education expenses, depreciation of your medical equipment, and student loan interest are frequently underreported on physicians’ tax returns. Your Certified Tax Coach can guide you through the nuances of these deductions, as well as the specific opportunities available to medical professionals.
The Benefits of Better Record-Keeping
Whether you work for yourself or you are employed by a larger healthcare organization, you are always moving at a rapid pace. For many physicians, that means letting the little things slide. While you always meticulously update your patients’ records, you are probably less careful about recording your expenses. Over the course of a year, these small charges add up, and you could be missing out on significant tax savings for want of a few receipts. Make financial record-keeping a priority, and you will notice a difference in your year-end tax bill.
Be Ready for Retirement
Paying off your student loans often takes precedence over saving for retirement – especially when you are just starting out in your career. However, contributing to your retirement accounts now has across-the-board benefits for your current and future financial state. The funds you deposit are given special tax-advantaged status, and when you contribute regularly over a long period of time, you are better able to ride out the ups and downs of the market.
For more information on tax-saving opportunities specifically impacting physicians, visit our consultation form for your copy of The Great Tax Escape.