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standard deduction vs itemized deductions

2/24/2018

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The lingo of taxes often leaves many confused and frustrated. One of the first decisions most taxpayers face is whether to claim the standard deduction or itemize their deductions. So, what exactly do these two tax terms actually mean?
The standard deduction is a dollar amount determined by law and is used to reduce the amount of income on which you are taxed. To keep things confusing, this deduction varies according to your filing status. There are also additional standard deduction amounts for individuals who are blind or over age 65.
Itemized deductions are reported on Schedule A and consist of the total of things like mortgage interest, property tax on your home and charitable contributions. There are several other less common items that can go on the schedule A, like employee business expenses and tax preparation fees. In order for itemizing deductions to be worthwhile, the total of those deductions must exceed the standard deduction amount.
It’s important to understand that you can only use one or the other on your tax return. You cannot claim both the standard deduction and itemized deductions on the same return.

If you have any questions feel free to contact us at (801) 210-1553.

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mortgage interest deduction

2/22/2018

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The new tax law has many people worried that they might lose their mortgage interest deduction.  For the vast majority of homeowners, the new law will have virtually no impact on their tax returns.

The mortgage interest deduction is now limited to home acquisition debt of $750,000 for mortgage debt incurred December 15, 2017 or later. The pre-Tax Cuts & Jobs Act (TCJA) limitation of $1 million applies to earlier home acquisition debt. As under prior law, the debt must be incurred to acquire the taxpayer’s main or second home.

Qualified mortgage debt no longer includes home equity indebtedness. This means home equity loans. However, if the proceeds of a home equity loan are used to substantially improve a home, such as adding a room, the loan will be considered acquisition debt.

For most homeowners, their interest deduction will remain a valuable part of their itemized deductions.
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If you have any questions feel free to contact us at (801) 210-1553.
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IRS & state of utah now accepting tax returns

2/5/2018

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The new tax law produced many changes and much confusion. Below is a summary of some of the most important tax items you should know.
Filing status remains same
  • Single
  • Married Filing Joint
  • Married Filing Separate
  • Qualifying Widow/er
  • Head of Household
 
There are now seven rates: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
 
Standard deductions have been increased
  • Married Filing Jointly/Qualifying Widow - $24,000
  • Head of Household - $18,000
  • Single/Married Filing Separate - $12,000.
  • The additional standard deductions for taxpayers 65 or older and/or blind are unchanged.
 
Long-term capital gain rates remain unchanged at 0%, 15% and 20% determined by income. 
 
Alimony received will not be taxable to the payee spouse and will not be deductible by the payor spouse effective in 2019 for agreements executed after December 31, 2018. Existing agreements are grandfathered, meaning alimony is still taxable/deductible per 2016 tax rules.
 
A maximum deduction of $10,000 ($5,000 for married taxpayers filing separately) is allowed for any combination of state and local income taxes or general sales taxes and state and local property taxes. State income taxes imposed in 2018 may not be deducted in 2017 if pre-paid in 2017. This is important because any prepayment for 2018 will be treated, for federal tax purposes, as if paid in 2018.
 
Foreign real property taxes: No deduction will be allowed for foreign real property taxes
 
These credits remain unchanged
  • Earned Income Tax Credit
  • Child and Dependent care credit (daycare)
  • Education credits (American Opportunity Tax Credit and Lifetime Learning credit)
  • Retirement Saver’s Credit.
 
One or more of these changes/credits may apply to you. To find out feel free to call us at (801) 210-1553 and we’ll help you get every credit and deduction legally allowable to you.
 
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