Tax Deductions

Should you itemize this tax season? Some important things to keep in mind for 2020.

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Should you itemize this tax season? That is a common question for many taxpayers this season. Are you holding off seeing an accountant because you aren’t sure whether or not you will need to itemize?

I’m sorry to tell you, the only way you’ll truly know whether or not you should itemize is to ask a tax professional. But since (good) accountants charge by the hour, you might want to prepare the proper documentation before you step foot into an accountant’s office.

That’s understandable. We’ll help you navigate the big questions of deductions and whether or not you should itemize your tax return for the 2019 tax season. Then we’ll instruct you as to what types of documentation you’ll need to collect if you do decide to itemize.

Should you take the standard deduction? 

For the 2019 tax season, the standard deduction is up to $12,200 for a single person. This means most taxpayers are going to take the standard deduction.

Here is a chart breaking down both the standard deduction for the 2019 tax season (the taxes you’re currently prepping) and the 2020 tax season (next year’s tax return).

Status

2019

2020

Married Filing Jointly

$24,400

$24,800

Head of Household

$18,350

$18,650

Single

$12,200

$12,400

Married Filing Separately

$12,200

$12,400

If you’re wondering what makes this number change year to year, you can blame tax changes (the 2018 Tax Cuts & Jobs Act bumped the standard single person deduction from $6,000 to $12,000) and inflation.  Congress adjusts the amount of the standard deduction to accommodate inflation.

The big boost in the standard deduction means that anywhere between 85 and 95% of taxpayers won’t need to itemize. We’ll help you determine if you’re part of that approximately 13% that the IRS estimates will itemize for the 2019 tax season.

How do you know if you should itemize? 

You’ll have to add it up.

Check your filing status (and the filing status of a spouse or any dependents). Find out what the standard deduction is for your status. Then add up all your expenses and see if you come in under, close to, or over the standard deduction.

A good accountant would help you maximize what you can write off, but you can get a gist of what you’ll need if you prepare ahead of time.

Start by finding out if you can itemize these 4 major deductions:

  • Charitable contributions

  • Medical Expenses

  • Mortgage interest

  • State and local taxes (think property and sales tax)

Medical expenses and mortgage interest alone might be high enough to put you over the threshold.  If you haven’t made it over the approximate $12k yet, continue by assessing how much you can deduct from these expenses:

  • Casualty, disaster and theft losses

  • Business expenses

  • Tax preparation fees

  • Investment interest

  • Mileage on a vehicle

  • Home office deductions

This covers a lot of areas where you might commonly receive a deduction.  The business deduction point will be a particularly tricky one if you aren’t strict about your record-keeping.

Remember, you don’ t need to get an exact count, you just need to get a rough idea of what you’ll need. That way you spend less time in the accountant’s office and more time doing what you do best.

Who might want to itemize? 

If you aren’t into adding up all the numbers, here are some categories of person who might want to itemize:

  • You run your own business – You have to spend money to make money, which means you’re making less money than it looks like on paper.

  • You have a high-interest rate on your mortgage.

  • You had a lot of medical expenses in the past year.

  • You pay for your own healthcare out of pocket.

If you’re even questioning whether or not you meet the threshold to itemize, its time to schedule a meeting with an accountant. This post helped you determine whether or not your tax situation might warrant itemizing deductions, now talk to your local tax advisor to find out for certain.

 

3 Tax Benefits for New York Veterans

Current and former members of the military are eligible for certain tax exemptions.

“These exemptions and credits are one small way we can show our gratitude to the brave and dedicated individuals who currently serve or have served in our military,” said Acting Commissioner of Taxation and Finance Nonie Manion in a 2017 press release.

Photo by Benjamin Faust on Unsplash

Photo by Benjamin Faust on Unsplash

In today’s post, we’ll examine a handful of the exemptions available for New York veterans.

Property Tax 

As many as half a million New York veterans benefit from property tax exemptions, many of which are offered by local governments.

Depending on the circumstance, the property tax burden of a wartime veteran could be up to 15% or even as high as 25% if the veteran serves in a combat zone.  Cold War veterans (between 1945 and 1991) could see up to 15% in exemptions.

If the veteran was disabled in the line of duty, they could see up to 50% off in exemptions.

How do these property tax exemptions work?

In September 2017, Gov. Cuomo signed a bill that allowed the 679 school districts the option to allow exemptions for Cold War veterans for the entirety of the time the veteran owns the property. Prior, it was 10 years.

To find out which of these exemptions applies to you, you’ll need to contact your local assessor’s office. Visit NYS’s Municipal Profiles website to get the contact information you need.

Military Pay  

If your permanent home was in NYS before you entered the military, you don’t have to pay income tax on your active-duty pay. But it isn’t quite that simple.

You have to meet ALL three of the following conditions:

  • Didn’t have a permanent home in NY

  • Maintained a permanent abode outside of NY (this excludes military quarters like barracks, BOQ, etc.)

  • Spent less than 30 days in New York during the year

Basically, you need have not lived in New York almost at all for the entirety of the year to be eligible for this perk. You also had to be living somewhere off-base/ship to not owe income taxes.

Hire a Veteran Credit 

There are two types of hire a veteran credit. They are:

  • Corporations subject to franchise tax

  • Individuals, estates and trusts under personal income tax laws

This credit applies if you or your business:

  • Hires a qualified veteran before January 1, 2020

  • Employees the qualified veteran for 35 hours

If the veteran is disabled, the credit is 15% of the total wages paid during the first full year of employment. That amount can’t exceed $15,000 per veteran.

If the veteran isn’t disabled, the credit is10%  of the total wages paid during the first full year of employment. For nondisabled veterans, the credit is capped at $5,000.

These are just a handful of the tax benefits, credits, and exemptions that veterans can take advantage of. Reach out to one of our tax professionals and we’ll ensure you’re getting the most tax benefits from your service.

 

6 FAQs About 529 College Savings Plans

College is a large expense and one worth planning for, especially if you want your future college graduate to start their lives with minimal debt. One common way to prepare for such an expense is to open a 529 college savings plan.

Photo by Ruijia Wang on Unsplash

Photo by Ruijia Wang on Unsplash

What is a 529 plan?

College savings 529 plans are state-sponsored savings accounts that offer both tax and financial aid benefits.

What states run a 529 program?  

Almost every state has a 529 program, each with different perks and benefits. You can pick based on perks and you don’t need to live in the state you opened the account in.

You can look at 529 plan options using this tool from SavingforCollege.com.

What are the two types of college 529 plans?

There are two types of 529 plans, they are:

  • College savings plans – This plan is similar to a Roth 401k or Roth IRA by allowing you to contribute after-tax income in the form of mutual funds and other types of investments. There are a number of investment options to choose from and the 529 account will go up and down and value according to those investment choices. The money is this account is available for tuition, books, and often housing.

  • College prepaid tuition-  This plan can be used to pre-pay all or part of the costs of an in-state public college education. Sometimes, they can be converted for use at private or out-of-state colleges.

What are the perks of using a 529 savings plan?

Each state provides slightly different incentives for its 529 programs. But some of the overall benefits include:

  • Large income tax breaks (for federal and often state taxes)

  • The donor stays in control of the account until its use

  • They’re low maintenance

When can you start them?

You can start one of these savings plans at any time. Most 529 programs are “set it and forget it” meaning the investments come straight out of your paycheck or bank account.

Where can I learn more about college 529 plans?

There are a lot of online resources for comparing and ranking different 529 programs. You can reference one of these, or reach out to your friendly neighborhood tax professionals. We can help you select the best option for you.

*Contact us here*

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.