Business Owners can Claim a Qualified Business Income Deduction

The following article was published by the IRS.

partnership-2750197_1280Eligible taxpayers may now deduct up to 20 percent of certain business income from domestic businesses operated as sole proprietorships or through partnerships, S corporations, trusts, and estates. The deduction may also be claimed on certain dividends. Eligible taxpayers can claim the deduction for the first time on the 2018 federal income tax return they file in 2019. This provision is the result of tax reform legislation passed in December 2017. Continue reading

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Child Tax Credit and Credit for Other Dependents

Many parents claim the child tax credit to help with the cost of raising children. This year the credit may help even more parents because the income limit for those who qualify has increased to $400,000 for married couples filing jointly and $200,000 for all other filers. Also the credit amount for each qualifying child has increased to $2,000.

This credit applies if the child is younger than 17 at the end of the tax year, you claim the child as a dependent, and the child lived with you for more than half the year. Be sure you have a valid social security number for each qualifying child before you file your tax return. You could get up to $1400 as a refund for each qualifying child, even if you don’t owe any tax.

If you can’t claim your dependent for this credit, you may qualify for a new credit: The Credit for Other Dependents. For this credit you may be able to claim qualifying children who do not have the required social security number, or a qualifying relative, such as a child 17 or older, or parents or other relatives that you support.  You could reduce your tax bill by $500 per qualifying person.

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Seniors Who Turned 70½ Last Year Must Start Receiving Retirement Plan Payments by April 1

woman-208723_1280In most cases, Monday, April 1, 2019, is the date by which persons who turned age 70½ during 2018 must begin receiving payments from Individual Retirement Accounts (IRAs) and workplace retirement plans.

Two payments in the same year
The payments, called required minimum distributions (RMDs), are normally made by the end of the year. Those persons who reached age 70½ during 2018 are covered by a special rule, however, that allows first-year recipients of these payments to wait until as late as April 1, 2019, to get the first of their RMDs. The April 1 RMD deadline only applies to the required distribution for the first year. For all following years, including the year in which recipients were paid the first RMD by April 1, the RMD must be made by Dec. 31. Continue reading

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Bad Money Moves We All Make

All of us have made bad decisions in our life at some point, and we will likely make some more in the future. While it’s always a good idea to avoid these scenarios whenever possible, this is especially true when it comes to money.

Here are five money mistakes that are relatively common:

  1. Using high interest credit cards that offset the gains of low interest savings accounts. You would be better off taking out some of your savings to pay down the high interest debt in many cases.
  2. Paying for things that are new when a used item would do. Buying used and saving or investing the difference will yield a huge reward down the line.
  3. Not contributing to your company’s retirement plan. This is especially true when they are offering matching money. In this case, not investing is literally throwing away money.
  4. Borrowing to buy things that go down in value. Borrowing for a house or some other appreciating asset is usually fine, but taking out a loan or using credit on things that depreciate, such as clothing and cars, is wise to avoid.
  5. Paying full price for rarely used items. Things such as snow blowers and lawn mowers aren’t typically everyday items. You may not get your return on your investment in these cases, so form a buyer’s club or borrow one when needed.

Continue reading

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Here are Five Facts about the New Form 1040

The following article was published by the IRS.

hello-1006426_1280_cr.pngThere are several changes to the 2018 Form 1040. However, taxpayers who file electronically may not notice the changes as the tax return preparation software guides people through the filing process.

The IRS worked closely with its partners in the tax return preparation and tax software industries to prepare for tax reform and tax form changes affecting tax year 2018, including the Form 1040.

Here are five things taxpayers need to know about the 2018 Form 1040. Continue reading

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Mortgage Interest Deduction

If you have a mortgage or home equity loan, it is important to know that tax reform changes have an impact on the mortgage interest deduction.

The first change is that you can deduct interest only if you are using the funds to buy, build, or substantially improve your main home or a second home. This means that interest paid on some home equity loans is not deductible. For example, if you use the loan to buy a car, pay down credit card interest, or some other purpose, you cannot deduct interest paid in 2018.

The second change applies to loans that were originated after December 15, 2017. You can now only deduct interest on the first $750,000 of these loans, or $375,000 if you are married filing separately. If you refinanced a loan after December 15, 2017, there are some special rules that may allow you to deduct interest on the full amount that you refinanced. Check out IRS.gov for more information.

Don’t forget, to claim the mortgage interest deduction you must itemize on your tax return. Tax reform has boosted the standard deduction, so in the majority of cases, it will be a better deal to take the standard deduction instead of itemizing. However, there are still some cases where itemizing will pay off. Make sure you check with your tax adviser or accountant with any questions regarding your situation.

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Recent Developments That May Affect Your Tax Situation

lobster-1615616_1280The following is a summary of important tax developments that occurred in October, November, and December of 2018 that may affect you, your family, your investments, and your livelihood.

Business meals. One of the provisions of the Tax Cuts and Jobs Act (TCJA) disallows a deduction for any item with respect to an activity that is of a type generally considered to constitute entertainment, amusement, or recreation. However, the TCJA did not address the circumstances in which the provision of food and beverages might constitute entertainment.

The new guidance clarifies that, as in the past, taxpayers generally may continue to deduct 50% of otherwise allowable business meal expenses if: Continue reading

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