Each year the tax code changes, so you should retain a professional to help you, especially if you have a business. However, even accountants can make mistakes and you might find yourself in need of a tax attorney. You may also wish to consult a tax attorney on major life changes, such as selling a house, getting divorced, short selling a house, or if you have questions about claiming payments such as alimony, lottery wins and other payments. Additionally, deductions may change from year to year. To avoid overpaying taxes, you should know which deductions you should take.
State Sales Taxes
As of 2015, Congress made the sales tax deduction permanent. However, you may choose to deduct sales tax or state income tax, whichever best benefits you. However, many states don’t charge a state income tax, so you’ll only have the ‘choice’ of the sales tax. The IRS uses a table to show how much people in different states are allowed to deduct for sales tax; however, if you bought a big-ticket item, you may add that to what the IRS allows.
Medical and Dental Expenses
Dental and medical expenses may be deducted, but only if you meet certain criteria. The medical expenses for your spouse, dependents and yourself must be more than 10 percent of your adjusted gross income. If you or your spouse are over the age of 65, the expenses must exceed 7.5 percent of your adjusted gross income. If your medical expenses are less than either threshold, you will not be able to use them as a deduction.
Tax Prep Fees
If you pay someone to do your taxes, that amount, if it is more than 2 percent of your adjusted gross income, is deductible. You may also include electronic filing fees.
It’s easy to remember to deduct large charitable gifts that you made using a check or a payroll deduction, but you might forget about some of those smaller out-of-pocket gifts. Those smaller charitable gifts add up, too. Don’t forget things such as ingredients for a dish you made for the soup kitchen, the clothing you donated or the stamps you used to mail out your child’s school fundraiser information.
Most home renovations are not deductible. However, if the improvements are for medical reasons, such as a wheelchair ramp or lower cabinets, those are deductible as medical expenses. If the renovations are made to increase the value of your home, you won’t be able to deduct them.
Student Loan Interest
Even if your parents pay back student loans, the child is entitled to claim the interest as a deduction, as long as the child is not a dependent on his or her parents’ tax return. Up to $2,500 is deductible, and it doesn’t have to be itemized. Since the parents are not liable for the debt, even though they may be paying it, the child is responsible for the debt, and is the one who is entitled to claim the deduction.
Mortgage Insurance Premiums, Interest and Points
If your mortgage insurance policy is from 2007 or later, you may qualify for a deduction for the premiums. This deduction did end in 2016. You may be able to go back and amend your tax returns for earlier years to claim this deduction.
In most cases, you are also eligible to deduct the interest you pay on your mortgage loan, as long as the interest is $1 million or less. However, married couples filing separately may only claim up to $500,000.
And, if you paid points when you first bought your home, you may be eligible to deduct those points all at once. However, if you just refinanced, the points are deductible over the life of the loan. If the loan is a 30-year mortgage, you would deduct 1/30th of the points each year for 30 years. It may not seem like much; however, every little bit helps. Once you sell the house or refinance it again, you are able to deduct the rest of the points.
Contact France Law Firm
If you have tax questions or concerns, contact France Law Firm to set up a consultation to learn more about your tax situation.