Tax Tips

Number 1 – Children

Claiming a child is probably the biggest change my clients see when it comes to their taxes. The Child Tax Credit is a $1,000 per child under the age of 17. There is also the Earned Income Credit which can be over $6,000. Working parents with children under 13 years old may qualify for the Child and Dependent Care Credit. The IRS allows a credit up to 35% of your daycare costs. If you have one child you can claim up to $3,000 worth of daycare expenses, and $6,000 if you have more than one child in daycare. Contact us to see if you qualify.

Number 2 – Education Credits

There are some really good credits and deductions out there. One of them is The American Opportunity Tax Credit which is a credit for 100% of the first $2,000 of qualified education expenses. This credit maxes out at $2,500 and a portion of the credit is actually refundable which is very rare in the tax code. It is important to note that if you are claiming the child that is enrolled you are allowed to take the credit even if you didn’t pay the expenses. So if grandparents helped pay for school or if a loan was used you are still allow to take the credit this year. There are very specific rules for what is deductible, how many credit hours you need to qualify and there are income limitations so make sure you contact one of our tax specialist to find out if you qualify.

Number 3 – Retirement Saving

There are, if you make a retirement plan contribution you could qualify for a credit of up to $2,000. The credit ranges from 10% all the way up to 50% of what you contribute into your retirement plan. If your income is less than approximately $62,000 for a married couple or $31,000 for a single person this credit might work for you. Even though we are now into 2018 you are still allowed to create and contribute to certain retirement plans which might help you qualify for the credit on your 2017 tax return. This is one of those few cases where you can consult with your tax professional and make a decision that will impact your 2017 tax return during 2018.

Number 4 – Vehicles

If you used your car in the act of charity during 2017 you are allowed to deduct 14 cents per mile. You can deduct 17 cents per mile for the use of your vehicle in association with medical or moving travel. Business mileage is the highest of all deductible travel at 53.5 cents per mile for 2017. You can use this deduction if you are self-employed or if you drive for an employer who doesn’t reimburse you the full 53.5 per mile. This deduction adds up quickly so make sure to contact one of our tax professionals to find out if you qualify.

Number 5 – Business Changes

If you are a business owner or have rental properties you are used to hear about depreciation from your CPA. There were some changes both for 2017 and 2018 worth mentioning. Over the last handful of years we have been able to deduct 50% of all brand new assets right away to help reduce the taxable income for my business owners. For equipment purchased after Sept 27th, 2017 they now qualify for a full 100% bonus depreciation and the assets no longer need to be brand new to qualify. If you are wondering why they used Sept 27th as the date for this change then get in line behind me! Beginning in 2018 there will be a potential major change for business or rental property owners that is overly complex but I will give a brief summary today. In 2018 a 20% business income deduction from taxable income will be available. If your taxable income is below approx. $160,000 if single and $315,000 if married you will probably qualify for this deduction. If you income exceeds these levels there are additional tests to determine the amount of your deduction. You will want to contact a tax professional that fully understands the new tax law to ensure you don’t miss out on this deduction.

Number 6 – 2018 Individual Tax Changes 1

The tax changes that passed at the end of 2017 completely changed the tax code for 2018. I will attempt to highlight some of the changes that will affect a lot of you listening today. The IRS standard deduction was almost doubled so if you are a single person it will be $12,000 up from about $6,000 and if married $24,000 up from about $12,000. In exchange for those higher standard deductions we are losing the $4,000 exemption per person on your 2018 tax return. Income tax rates are going down. We now have a lower 12%, 22% and 24% brackets down from 15%/25%/28% and the tax brackets have been widened so more of your income will be taxed at a lower rate in 2018.

Number 7 – 2018 Individual Tax Changes 2

The child tax credit will be doubled for 2018 from $1,000 up to $2,000. If you claim a child that is under the age of 17 during 2018 you might qualify for that $2,000 credit. They increased the amount you can earn and still qualify for this credit so if in the past you didn’t qualify you probably will in 2018. Many items on Schedule A which is commonly known as filing the long form have changed or been eliminated for 2018. The state tax deduction will be limited to $10,000, home equity loan interest is no longer deductible and all miscellaneous itemized deductions have been eliminated. So if you used to deduct business expenses, union dues and other miscellaneous items they are no longer allowed in 2018.

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