NEWS & UPDATES IN THE ACCOUNTING WORLD
Peruse our News section below filled with helpful tips regarding your financing, company updates and industry resources. Doing our job well doesn’t end at handling accounts and managing finances - it extends past the office and into the trends, changes and news in the finance industry. We’re especially proud of staying up to date on new ways to help our clients manage their money, and we will always share thoughts and updates with visitors and customers to ensure they’re in the loop too.
WHEN SHOULD YOU ITEMIZE AND WHAT?
You should itemize deductions if your allowable itemized deductions are greater than your standard deduction. The most common expenses that qualify for itemized deductions are home mortgage interest, property, state and local income taxes. Investment interest expenses, charitable contributions, and medical expenses. (IRS 164(b)(6).
For tax year 2018 through 2025, taxpayers can claim itemized deduction of $10000 if married filing jointly and $5000 if married filing separately.
Medical expenses are subject to 10 percent of adjusted gross income threshold for tax year 2019. Previously it was subject to 7.5 percent of adjusted gross income. (IRC 213(f).
Before the TCJA, home mortgage interest could be deducted on mortgage loans of up to 1 million for individuals married filling jointly and half a million for individuals married filing separately. However, for 2019 tax year homeowners can deduct interest expenses on up to $750,000 of mortgage debt from their income taxes.
Charitable contributions are subject to 60 percent of adjusted gross income for an individual taxpayer’s cash charitable contributions to public charities, private foundations and certain government unit. The 60 percent contribution base limit applies to qualifying cash contributions made after December 31,2017 and before January 1, 2026 (IRC 1709(b)(1)(G)(i).
SOME NEW BUSINESS TAX LAWS
The IRS Extends 199A Deduction to Real Estate Activities, Modifies and Finalizes Proposed Regs (Rev.Proc.2019-11. T. D98xxI, TDNR SM-0589, NPRM REG-13452-18, IR-2019-4, Notice 2019-7) January 21,2019(The Final Regulations)
Who can claim the 199A deduction?
The Section 199A deduction is available to any taxpayer other than a C corporation. The deduction is taken by a Form 1040 taxpayer on Line 9 of Form 1040 and is available to trusts and estates. Non-resident aliens can also claim it provided they have effectively connected U.S. business income.
Is Rental real estate a trade or business?
The Tax Cuts and Jobs Act (TCJA) Tax Reform added new tax code section 199A, which created 20 percent tax deduction possibility for your rental property.
Under the final regulations a rental activity can qualify for the section 199A deduction in one of three ways.
A Code section 162 trade or business
Meet the requirement s of Notice 2019-07 rental safe harbor
Rental activity is to a commonly controlled trade or business
If your rental property activity meets the definition of a trade or business activity, the following tax benefits are available:
Your rental property can create a section 199A tax deduction of up to 20 percent of the rental property’s qualified business income (QBI).
Your rental property receives tax favored Section 1231 treatment, which upon sale delivers either an ordinary loss or a capital gain.
Your rental property can create the home office deduction if you meet the other home office requirements of exclusive and regular use.
Your rental business status creates rental property deductions for the cost of your attendance at rental property meetings, seminars and conventions.
Your rental business status enables Section 179 expensing for certain assets used in the busine. The new 1040- Sr created by IRS for taxpayers age 65 and older. It was created to accommodate seniors to file their return with ease. 1040- Sr is intended to replace form 1040 EZ.ss.
NEW CHILD TAX CREDIT YOU SHOULD KNOW
Child tax credit or CTC for tax years beginning after 2017 and before 2026 doubles the maximus CTC from $1000 to $2000. Tax Cuts and Jobs Act (TCJA)
TCJA allows partial CTC for dependents who are not qualifying children under age 17. (See IRC Sec.24(H).
For tax year 2018-2025, the CTC is not allowed unless the child’s social security number was issued before the due date of the taxpayer’s return. ITIN’s and ATINs are not acceptable for getting the maximum $2000 child tax credit.
If you have a U.S. citizen, National or a resident status you can claim the new partial child tax credit of $500 for tax years 2018-2025. Residents of Canada or Mexico do not qualify for the partial child tax credit unless they are U.S. Citizens or nationals. (See IRC Sec. 24(h)(40).
The partial credit is available for qualifying children over age 16 and no portion the credit is refundable.