New Book – How To Slash Your Taxes!
Let’s face it, no one likes to pay more in taxes than they should. In our office, we typically tell taxpayers that they should aim to be within +/- $1,000 with regards to their refund or having a balance due. A balance due of $1,000 while not pleasant, is manageable for most people when it comes to paying it outright or setting up a payment plan. Getting a refund of $1,000 or less you means that you didn’t give Uncle Sam too much of an interest free loan for a year. Hey, it’s not called a “refund” for no reason; it’s your own money they are giving you back!
But what happens when people (i.e. taxpayers or tax preparers) push the limits to cut a tax bill? Well, since we deal with the consequences fairly often, let’s just say that it’s usually not good. Furthermore, it’s totally unnecessary and who has the time to keep looking over their shoulder wondering if the big, bad IRS is going to come knocking?
The point of this book is to show you that there are hundreds of ways that you can achieve tax savings while doing it both legally and ethically. This is largely due to the complexities of the Internal Revenue Code (IRC) and all of the loopholes that have been incorporated into it over time. This book highlights 111 topics that can help you capitalize on this fact and in turn slash your tax liability.
So no matter if you are a parent, homeowner, investor, landlord, retiree or business owner, this book has something for everyone! Check out the video below to hear more and look below the video on ways that you can place an order.
You can also view this video on our YouTube Channel here.
How To Order Your Copy
Order directly from our office. You can order via credit card by clicking the “Buy Now” button below. If you select the “autographed with my custom message” option, you will be contacted post order to obtain your message. Please note that payment processing is performed via PayPal and if you do not have an account, you can simply select the option to pay with credit or debit card at the bottom. All orders processed via this method include Illinois sales tax as well as priority shipping via USPS.
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Order via Amazon. If you do not want an autographed copy, or do not want to order via our office, you can order your copy via Amazon. Simply visit the author page for Jared R. Rogers, CPA and complete your order that way. You will have the choice of ordering either the paperback or Kindle edition.
How Will The New Tax Law Affect Me?
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. It has been touted as one of the most significant overhauls to the Internal Revenue Code since the Tax Reform Act of 1986. The new law reduces tax rates for corporations and individuals, while repealing many deductions taxpayers were accustomed to, in an attempt to “simplify” the filing of their tax returns. This post will focus on the changes that will impact individuals. We’ll follow it up with another that focuses on the changes for business entities at a later date.
One of the most important things to note about the changes outlined below is that many go into effect for tax years ending after January 1, 2018. As such, most of this will not apply when you file your 2017 tax return during the 2018 filing season (i.e. the ones due 4/17/18). With that said, under each section you will find a “planning” comment to aid you in preparing for how it may impact the tax return you file in early 2019.
Tax Brackets and Tax Rates
The new law retains the seven tax brackets that previously existed, however, the rates are now 10%, 12%, 22%, 24%, 32%, 35% and 37%. Shown below are how the brackets and rates are applied to each filing status:
Single Taxable Income
$0 to $9,525 × 10.0% minus $0.00 = Tax |
$9,526 to $38,700 × 12.0% minus $190.50 = Tax |
$38,701 to $82,500 × 22.0% minus $4,060.50 = Tax |
$82,501 to $157,500 × 24.0% minus $5,710.50 = Tax |
$157,501 to $200,000 × 32.0% minus $18,310.50 = Tax |
$200,001 to $500,000 × 35.0% minus $24,310.50 = Tax |
$500,001 and over × 37.0% minus $34,310.50 = Tax |
Married Filing Joint & Qualified Widow(er) Taxable Income
$0 to $19,050 × 10.0% minus $0.00 = Tax |
$19,051 to $77,400 × 12.0% minus $381.00 = Tax |
$77,401 to $165,000 × 22.0% minus $8,121.00 = Tax |
$165,001 to $315,000 × 24.0% minus $11,421.00 = Tax |
$315,001 to $400,000 × 32.0% minus $36,621.00 = Tax |
$400,001 to $600,000 × 35.0% minus $48,621.00 = Tax |
$600,001 and over × 37.0% minus $60,621.00 = Tax |
Married Filing Seperate Taxable Income
$0 to $9,525 × 10.0% minus $0.00 = Tax |
$9,526 to $38,700 × 12.0% minus $190.50 = Tax |
$38,701 to $82,500 × 22.0% minus $4,060.50 = Tax |
$82,501 to $157,500 × 24.0% minus $5,710.50 = Tax |
$157,501 to $200,000 × 32.0% minus $18,310.50 = Tax |
$200,001 to $300,000 × 35.0% minus $24,310.50 = Tax |
$300,001 and over × 37.0% minus $30,310.50 = Tax |
Head of Household Taxable Income
$0 to $13,600 × 10.0% minus $0.00 = Tax |
$13,601 to $51,800 × 12.0% minus $272.00 = Tax |
$51,801 to $82,500 × 22.0% minus $5,452.00 = Tax |
$82,501 to $157,500 × 24.0% minus $7,102.00 = Tax |
$157,501 to $200,000 × 32.0% minus $19,702.00 = Tax |
$200,001 to $500,000 × 35.0% minus $25,702.00 = Tax |
$500,001 and over × 37.0% minus $35,702.00 = Tax |
Standard Deduction
The new law doubled the amount of the previous standard deduction to the following amounts:
Standard Deductions Per Filing Status
Single or Married Filing Seperate | $12,000 |
Married Filing Jointly of Qualifying Widow(er) | $24,000 |
Head of Household | $18,000 |
Additional age 65 or older, or blind, per person, per event: | |
MFJ, QW or MFS | $1,300 |
Single or HOH | $1,600 |
Dependents. The standard deduction is the greater of $1,050 or earned income plus $350, up to regular standard deduction |
Planning Comment: If you previously itemized, you may no longer need to due to these increased amounts. Remember, the IRS lets you take the standard or itemized deduction, whichever is greater. With that being said,if your itemized deductions (discussed below) do not exceed these amounts, your tax filing just “theoretically” became more simple.
Personal Exemptions
The personal exemption has been repealed and will not be available after tax year 2017.
Planning Comment: If you have a large family and moderate income, this change might hurt you. Because you will no longer receive an exemption for every member of your household listed on your return (which lowers your taxes), you could see your tax bill increase.
The Alternative Minimum Tax (AMT)
The phaseout thresholds have been increased to $1,000,000 for those filing as married filing joint, and $500,000 for all other taxpayers (other than estates and trusts). These amounts are indexed for inflation.
Alternative Minimum Tax (AMT) Exemptions
Individual | $70,300 |
Married Filing Jointly & Surviving Spouses | $109,400 |
Married Filing Separately | $54,700 |
Itemized Deductions
With the exception of the items outlined below, all other itemized deductions are repealed. The overall limitation on itemized deductions for upper income individuals is also repealed.
- Medical Expenses: For 2017 through 2018, expenses exceeding 7.5% of income are deductible. This percentage increases to 10% in 2019.
- State and Local Taxes (SALT): Taxpayers can claim up to a $10,000 deduction for a combination of state and local income tax, sales tax, or real estate taxes. Foreign real property taxes are no longer deductible.
- Mortgage Interest: The deduction for mortgage interest is capped at $750,000 of debt, but is still allowed on a first or second home. The interest on home equity loans will no longer be deductible. Interest on up to $1 million of acquisition debt for loans entered into prior to December 15, 2017 is grandfathered and still deductible.
- Charitable Contributions: Taxpayers who are able to itemize deductions can still include charitable contributions. The current limitation to 50% of income is increased to 60%.
- Casualty Losses: Deductions for unexpected losses to personal property are no longer deductible unless covered by specific federal disaster declaration.
- Wagering Losses: The meaning of losses from wagering transactions (i.e. gambling) is clarified to include other expenses incurred by the individual in connection with the conduct of that individual’s gambling activity (e.g. travel expenses to or from a casino).
Planning Comment: There are two big changes/challenges in this area. First, since the SALT deduction is capped at $10,000, that means that you have to close a gap of anywhere between $2,000 – $14,000 to keep itemizing depending on your filing status. As such, we suspect that single homeowners may still find themselves itemizing, but those filing as married filing joint may not (unless they pay a significant amount of mortgage interest).
The second area revolves around the removal of the items that were subject to a 2% floor of your income. So, if you previously deducted any of the items listed below, know that you will not be able to claim them after filing your 2017 tax return:
- work-related travel, transportation, meal, and entertainment expenses
- depreciation on a computer or cellular telephone your employer requires you to use in your work
- dues to a chamber of commerce (or professional societies) if membership helps you do your job
- education (work-related)
- home office expenses for part of your home used regularly and exclusively in your work
- legal fees
- subscriptions to professional journals and trade magazines related to your work
- tools and supplies used in your work
- union dues and expenses
- work clothes and uniforms (if required and not suitable for everyday use)
- tax preparation fees
Child Tax Credit
The child tax credit will increase to $2,000 per qualifying child and will be refundable up to $1,400 (subject to phaseouts). Phaseouts, which are not indexed for inflation, will begin with adjusted gross income of more than $400,000 for those filing as married filing jointly or $200,000 for all other taxpayers.
Non-Child Dependent Credit
A new $500 non-refundable credit covers dependents who don’t qualify for the child tax credit, such as children who are age 17 and above or dependents with other relationships (such as elderly parents). You can’t claim the credit for yourself (or your spouse under married filing jointly status).
Kiddie Tax
The kiddie tax applies to unearned income for children under the age of 19 and college students under the age of 24. Unearned income is income from sources other than wages. Taxable income attributable to net unearned income will be taxed according to the brackets applicable to trusts and estates. The rules for tax applicable to earned income are unchanged.
Student Loan Interest Deduction
For 2018, the maximum amount that you can deduct for interest paid on student loans remains at $2,500. Phaseouts apply for taxpayers with modified adjusted gross income (MAGI) in excess of $65,000 ($135,000 for joint returns) and is completely phased out for taxpayers with modified adjusted gross income (MAGI) of $80,000 or more ($165,000 or more for joint returns).
Section 529 Plans
Distributions of up to $10,000 per beneficiary can be used for tuition expenses for public, private or religious elementary or secondary school. The limitation applies on a per student basis rather a per account basis. Distributions can also be made for expenses related to homeschool.
Discharged of Student Loan Indebtedness
The exclusion from income resulting from the discharge of student loan debt is expanded to include discharges resulting from death or disability of the student.
Educator Expenses
The bill retains the present law above-the-line deduction of $250 (indexed for inflation) for out-of-pocket expenses.
Bicycle Commuting Reimbursement
The exclusion from gross income and wages for qualified bicycle commuting reimbursements up to $20 is suspended.
Moving Expense Deduction
Moving expenses related to a job change are no longer deductible except for active members of the military.
Alimony
Beginning with divorces in 2019, alimony payments to an ex-spouse are no longer deductible and not taxable to the recipient.
Affordable Care Act
The penalty for failing to maintain minimum essential coverage for individuals (individual mandate) is repealed beginning in 2019.
Estate Tax Exemption
The estate and gift tax exemption is doubled for estates of decedents dying and gifts made after December 31, 2017, and before January 1, 2026. The exemption increases to $11,200,000 in 2018. The generation skipping transfer (GST) tax exemption is also doubled.
Changes To Be Aware Of When Filing Your 2017 Tax Return
The U.S. tax code is constantly being modified, which means that each new filing year brings changes that taxpayers need to remember when filing their tax return. So what changes took place last year, and how will they impact the filing of your tax year (TY) 2017 federal tax return? Read on my dear friend.
Two extra days to file
This change is probably most important to all those procrastinators out there. April 15th is the traditional day in which we’re all supposed to file our tax return. But this year, filing day has been pushed back to April 17th due to the combination of a weekend and a Washington, D.C. holiday.
The usual April 15th deadline falls on a Sunday this year. Normally, taxpayers would have to file their tax returns by the following Monday, which would be April 16th. But the D.C. holiday Emancipation Day is held on Monday, April 16th. Since Federal law states that Washington, D.C. holidays impact tax deadlines the same way federal holidays do, that gives taxpayers across the country yet even another extra day to file.
Inflation adjustments
For TY 2017, the IRS increased the value of some different tax benefits:
- The standard deduction was increased to $6,350, $9,350 and $12,700 for those using the single, head of household and married filing jointly filing statuses respectively
- The maximum earned income tax credit (EITC) rises to $6,318
- The maximum income limit for the EITC rises to $53,930
- The foreign earned income deduction rises to $102,100
You might need a driver’s license or state ID to file electronically
Tax fraud has become a growing problem over the years. To combat this, many states are now requesting or even requiring that taxpayers provide their driver’s license or state ID information if they want to file their state tax returns electronically. You’ll still be able to submit your state tax returns electronically without providing this information, but doing so might trigger a manual review by your state to verify your identity. This means it could take longer to receive any refund you are entitled to if you don’t provide this information.
Refunds will be held for those claiming EITC or ACTC until mid February
The IRS will not issue refunds for people claiming the EITC or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund, even the portion not associated with EITC or ACTC. Per the IRS, they expect the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or debit cards starting on February 27, 2018, if direct deposit was used and there are no other issues with the tax return. This law change, which took effect at the beginning of 2017, helps ensure that taxpayers receive the refund they’re due by giving the IRS more time to detect and prevent fraud.
The IRS will not accept e-filed returns without indicating health coverage compliance
The IRS has stated that it will not accept electronic tax returns from individuals who do not address the health coverage requirements of the Affordable Care Act (ACA). The IRS will accept electronic returns only when taxpayers indicate whether they had health insurance, had an exemption, or will make a shared responsibility payment. The good news is that the penalty amounts remain the same for TY 2017.
The floor to deduct medical expenses has been lowered to 7.5 percent of AGI
The threshold for unreimbursed medical expenses increased from 7.5 percent to 10 percent of Adjusted Gross Income (AGI) for most taxpayers in 2014. There was a temporary exemption from January 1, 2013 to December 31, 2016 that allowed individuals age 65 and older and their spouses to still use the lower 7.5 percent floor. However, due to the Tax Cuts and Jobs Act of 2017, all taxpayers are now subject to the decreased threshold of 7.5 percent.
Mileage
Do you use your car for business or work? Well, the standard mileage rate dropped to 53.5 cents per mile, down from 54 cents for 2016. The rate used for medical and moving mileage drops to 17 cents per mile, down from 19 cents in 2016. If there is a bright spot, the charitable mileage rate remains unchanged at 14 cents per mile.
Tuition and fees deduction eliminated
This above the line deduction expired at the end of 2016. While there is a bill proposed by the Senate Finance Committee to “extend” this and other expired tax provisions, it hasn’t been passed as of the writing of this post. With that being said, you can no longer take a “deduction” for tuition or qualified fees you pay on behalf of yourself or your dependents. However, the American Opportunity Tax Credit and the Lifetime Learning Tax Credit are still available. Just noted that they are subject to phase-out limits and some other restrictions that prevent all taxpayers from claiming them.
Exclusion of foreclosure debt forgiveness from income eliminated
Another big change is the elimination of the tax code provision that allowed taxpayers who had discharged indebtedness related to home foreclosure to exclude it from their income. The qualified principal residence indebtedness exclusion allowed individuals to exclude discharged debt from being reported as income. However, similar to above, this provision expired at the en of 2016 and is another item included in the extender bill mentioned above.
Time running out to claim your TY 2014 refund
April 17, 2018, is the last day to file your 2014 tax return to claim a refund. If you miss the deadline, your refund goes to the U.S. Treasury instead of to you. You also lose the opportunity to apply any refund dollars to another tax year (e.g. 2015, 2016, etc.) in which you owe income tax.
You might need to renew your ITIN if you have one
The 2015 Protecting Americans from Tax Hikes (PATH) Act provided that an Individual Taxpayer Identification Number (ITIN) would expire if an individual fails to file a tax return (or is not included as a dependent on another’s tax return) for three consecutive years. Under this new rule, taxpayers who have an ITIN that has not been used at least once in the past three years will no longer be able to use that ITIN on a tax return as of January 1, 2017. Additionally, individuals who were issued ITINs before 2013 are now required to renew their ITINs on a staggered schedule between 2017 and 2020. So, if any of the above situations apply to you and you need to file a tax return in 2017, you may need to renew your ITIN if it has expired.
Foreign financial disclosures
If you are a U.S. resident, you have to file information about your foreign holdings if they exceed $50,000 at year-end, if you’re a single filer. Foreign holdings exceeding $75,000 at any point during the year must also be reported. For those who are married filing jointly, the limits rise to $150,000 at any time, and $75,000 at year-end.
For U.S. citizens living abroad, the reporting limits rise substantially. Single filers need only report accounts exceeding $200,000 at year-end, or $300,000 at any point during the year. For joint filers, the limits are $400,000 at year-end, or $600,000 at any time during the year.
Calculating Your RMD – 10 Facts
So you made it to retirement. You’ve got all this money stashed away for cool retirement stuff. Trips, experiences, spoiling the grandkids, playing golf, puttering around in the garden, yada, yada, yada. But then you reach 70 1/2 and something crazy happens. “What do you mean I have to take money out of my retirement accounts?” Welcome to the land of the Required Minimum Distribution (RMD) my friend! This post will tell you about all the important things you need to know about RMDs so that you don’t get in trouble with Uncle Sam.
What is a RMD? When you reach 70 1/2 the IRS requires you to withdraw at least a minimum amount each year from all your IRAs and retirement plans and pay ordinary income taxes on the taxable portion of your withdrawal. If you don’t take withdrawals, or you take less than you should, Uncle Sam will assess you a “penalty tax” on the difference between the amount you withdrew and the amount you should have withdrawn. On top of that, you’ll still have to withdraw the required amount and pay any income tax due on the taxable amount.
What types of retirement plans do RMDs apply to? The RMD rules apply to all employer sponsored retirement plans like profit-sharing plans, 401K, 403B, and 457B plans. They also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs. While the rules also apply to Roth 401(k) accounts, they do not apply to Roth IRAs while the owner is alive.
When must I receive my RMD from my retirement account? You must take your first RMD for the year in which you turn age 70½. However, the first payment can be delayed until April 1 of the year following the year in which you turn 70½. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31 of the year. Two important points about actually “taking” the distributions:
- Note that you can take it in installments; you are not required to take it as a lump sum.
- If you decide to delay taking your first RMD until the next year, you’ll have to take two minimum distributions during that calendar year. This can put you in a higher tax bracket for that year, significantly increasing the tax you owe.
Who calculates the RMD amount? Although the IRA custodian, retirement plan administrator or even your accountant may calculate the RMD, it is the account owners ultimate responsibility for calculating the amount of the RMD.
How is the amount of the required minimum distribution calculated? The amount of the RMD amount is determined by applying a life expectancy factor (set by the IRS) to your account balance at December 31st of the previous year. To calculate your RMD:
- Download the IRS RMD Worksheets to help you peform the calculations
- Find your age in the IRS Uniform Lifetime Table
- Locate the corresponding life expectancy factor
- Divide the account balance as of December 31 of the prior year by your life expectancy factor
Note: If your spouse is more than ten years younger than you and is the sole primary beneficiary, you must use the Joint Life and Last Survivor Expectancy Table. You can find all the lifetime tables in IRS Publication 590B.
Can you take your RMD from one account instead of separately from each account? An IRA owner must calculate the RMD separately for each IRA, but can withdraw the total amount from one or more of the IRAs. The same applies to someone with a 403B. However, RMDs required from other types of retirement plans, such as 401K and 457B plans have to be taken separately from each of those plan accounts.
Can one withdraw more than the RMD? Yes. It is the “minimum” distribution you must take. You are always welcome to take more.
What happens if a person doesn’t take a RMD by the deadline or in the wrong amount? If an account owner fails to withdraw a RMD, the full amount of the RMD, or fails to withdraw the RMD by the applicable deadline, the difference between what was and what should have been taken out is taxed at 50%. The account owner should file Form 5329 with their tax return for the year in which the full amount of the RMD was not taken.
Can a distribution in excess of the RMD for one year be applied to the RMD for a future year? Quite simply stated…no.
How are RMDs taxed? Distributions are taxed at the account owners ordinary income tax rate. However, to the extent the RMD is a return of basis or is a qualified distribution from a Roth IRA , it is tax free.
Joint mortgage, but only one SSN on 1098?
So maybe you purchased a home with your fiance, spouse, parents, friend or business partner. Each of you pays half (or some other portion) of the mortgage throughout the year. When it comes time to file your taxes, you plan to file a return separate from the other person, but there is just one problem. Then 1098 that was provided either list both of your names and the other persons SSN OR it simply just list the other parties information all together. So how do you go about claiming your piece of what is reported on the 1098?
Figure Your Share
If you and another party (or multiple parties) were liable for, and make payments towards, a mortgage in which another party received the Form 1098, the first thing you must do is figure out each party’s share. Technically the person that received the From 1098 should do this and provide the amounts to you, but in reality either party may do it. So, for example, if each person paid 50% of the payments that yielded $9,825 of interest being reported on the Form 1098, then each one is entitled to deduct $4,912.50 on their tax return.
Attach A Statement To Your Return
To report the $4,912.20 of mortgage interest paid, each person should attach a statement to their tax return explaining this. Show how much of the interest each person paid, and give the name and address of the person who received the form. Your share of the interest is then reported on Schedule A (Form 1040), line 11, along with the words “See attached” next to the line. The person may also deduct their share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. If the property in question is a rental property, then you can follow the same procedures stated above, but enter “See attached” on line 12 of Schedule E.
For more information on the above, or reporting home mortgage interest in general, see Publication 936; Home Mortgage Interest Deduction and refer to the section “How To Report.”