Itemized Deductions Changes

This video was published by the IRS.

Changes from the Tax Cuts & Jobs Act mean the standard deduction is worth almost twice what it was before. So you may get more benefit from the standard deduction than from itemizing. To figure out whether you should itemize, you can search “How Much is Standard Deduction” at IRS.gov, or speak with a tax professional.

If you choose to itemize your deductions, the law change also affects what expenses you can claim on Schedule A. You may deduct medical and dental expenses that exceed a certain percent of your adjusted gross income. The law now limits your total deduction for state and local, property, income, and sales tax to a combined total of $10,000 — $5,000 if married filing separately.

It also limits the amount of home mortgage interest and home equity interest you can deduct. Search Publication 936 at IRS.gov to learn more about these limits. Continue reading

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Taxpayers Must Report Health Care Coverage on 2018 Tax Return

The following article was published by the IRS.

family-2073602_1280.jpgAs taxpayers are completing their 2018 tax returns this year, they must complete the lines related to health care.

For tax year 2018, the IRS will not consider a return complete and accurate if individuals do not do one of the following on their return:

  • Report full-year health coverage
  • Claim a coverage exemption
  • Report and make a shared responsibility payment for everyone on the tax return

The law continues to require taxpayers who do not qualify for an exemption to maintain health care coverage in 2018 or make a shared responsibility payment when they file their tax return. Continue reading

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How to Pay Off Your Mortgage Early

For most people, a home is both the biggest investment they will ever make, as well as the greatest debt they will ever incur when factoring in a mortgage. True financial freedom often requires paying off this mortgage, but that often takes 15-30 years (or longer).

For some, it is possible to pay off their mortgage even faster. Here are some ways:

If you can refinance, opt for a 15-year loan over a 30-year. Not only are these loans half the term, they often come with more favorable interest rates. This strategy may not be for everyone. Refinancing may be expensive, and a 15-year note does come with higher monthly payments-something not everyone can afford. But if you can, do it! Continue reading

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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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