Tuesday Tax Tip #5

It's a super exciting time of year! Not just because my DVR is full of Winter Olympics coverage, but Tax Season 2018 is also underway! Below are a whole bunch of tax tips I felt were important to get out there.

• Important Updates, particularly for Homeowners and Students! Last week, the US Government passed a budget bill that retroactively renews many expired tax provisions. Two major ones are the ability to deduct Mortgage Insurance Premiums as an itemized deduction and the Tuition & Fees Deduction. If you typically claim MIPs on Schedule A or the Tuition & Fees Deduction, I would hold off on filing until the IRS assesses these changes and makes any updates to the 2017 tax forms.
  • You can read more (from Drake Software, the company I use and love) here: https://taxingsubjects.com/our-blog/taxnews/budget-bill-passed-renews-tax-extenders/
  • And the IRS statement here: https://www.irs.gov/newsroom/irs-statement-on-retroactive-extender-provisions

• Friendly reminder that the IRS will never call or email you asking for personal information. Their preferred method of initial contact regarding an issue is still paper mail. If you receive a call from someone claiming they are from the IRS, do not give them any information. You can always call the IRS directly and confirm any details around any issue.
  • There is a new phishing scam this year, including using real taxpayer bank accounts to deposit fraudulent refunds. The scammer then contacts the recipient of the deposit, posing as the IRS, and asks the person to wire the money back, since it was received in error. Keep an eye on your bank account, and call the IRS in the event of any unexpected deposits or checks received.

• The Homestead Property Tax Credit: Some states have credits available for property tax and rent amounts paid. Michigan is one of those states. If your total household resources (a combination of income and other benefits, less federal adjustments and medical insurance premiums) are below $50,000, you may be eligible for this credit. It's a credit I often see missed and directly affects the amount of state tax owed.
  • For more information: http://www.michigan.gov/taxes/0,4676,7-238-43535_43538-155081--,00.html

• Personal Property Taxes/Vehicle Registration: Every state has its own way of calculating the registration fee on a vehicle, and those calculations typically take several factors into account. If a state charges the registration fee (or a portion of it) based on your vehicle's value, the value-based portion of the fee is then deductible on Schedule A if you itemize on your return. For example, in Michigan you can deduct the license fee you paid based on your vehicle's value, if the model year is 1984 or newer.
  • Here is a helpful chart by state: https://ttlc.intuit.com/questions/3926322-is-my-car-registration-fee-deductible

• Home Office Deduction: There are two ways to take a home office deduction on self-employed income. Some people have expressed concern that claiming this deduction is a red flag for the IRS, and although there is no set formula for whether a return will get audited or not, taking the home office deduction is allowable and fairly common, if you meet certain requirements. The IRS even implemented the simplified method of calculating it to reduce bookkeeping time and errors.
  • You can read more here: https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

As always, feel free to reach out with any questions or if you'd like assistance filing your returns - email jc@jcherrycpa.com or call/text (248) 845-8148. Happy Filing!