Tax Credits You May Not be Aware That You Had
Despite the fact that nobody likes paying taxes, you’d be surprised at how many people pay more than they have to. Wherever you stand on the debate over whether we have too many or too few tax loopholes, the fact is that they are there for the taking, and they aren’t just for big businesses or millionaires.
Home Office and Mortgage Credits
For example, many people aren’t even aware that they may qualify for a home office tax credit. Taxpayers can deduct $5 for every square foot of their home office, up to 300 feet. This is the easy method; the more difficult method requires calculation of expenses used for your office as compared to the expenses of your home as a whole. That may yield a bigger benefit, but for those looking to avoid complexity, and just get a small and easy break, the $5 per foot rule can be used.
Taxpayers can get a deduction for mortgage interest. Many already take this deduction, but the rules have changed such that it is per taxpayer. That means if two taxpayers pay interest on a home, they both can get the benefit of the deduction, so long as the taxpayers aren’t related.
Because of that provision, the deduction probably will be used more often by investors in property, where there are multiple owners who share in the expenses of any mortgage.
Laws have also changed as to debt related to mortgages that have been forgiven by banks. This happened often during the foreclosure crisis (and still does). So long as an agreement was entered into in 2016 to forgive debt, the forgiven amount will not be taxable. But remember that the credit was not extended to 2017, so if you haven’t entered into a forgiveness agreement already, and you do now, you may face a tax penalty for that.
Medical Expenses and Child Care
If you have extraordinary out-of-pocket medical or dental expenses, these can be deductions as well. Any amounts that you paid which are more than 10 percent of your adjusted gross income, qualify for a deduction. That includes expenses for prescriptions or medical devices.
If you are a small business owner, old enough to be eligible for Medicare, and pay a Medicare premium, those amounts can be deducted as well, so long as you don’t have coverage anywhere else (such as through a spouse).
If you have a child under the age of 13, and pay for the child to have care or supervision so that you can work or look for work, you may get a deduction for that as well. These are normally daycare expenses, but can include in home sitters, and may include after-school care as well.
Tax laws can be complex, and are changing all the time. Don’t miss out on a break that you deserve. Contact Tampa business attorney David Toback to discuss a comprehensive tax and estate plan.