Category: Tax Tips

Homeownership and Your 2017 Tax Return

The deadline to file your 2017 tax returns is approaching on April 17th. If you have not filed your taxes yet, you can take this opportunity to talk to your tax professional about how homeownership may impact your tax return this year. Here are a few reasons why you may want to.

Mortgage Interest may be tax deductible

According to the IRS, taxpayers may deduct interest on up to $1,000,000 of their qualified home loan on 2017 tax returns. If you are married filing separately, you can deduct up to $500,000.

Under the Tax Cuts and Jobs Act of 2017, for home purchases after December 15th, 2017, interest may only be deducted on qualifying mortgage debt up to $750,000 when filing 2018 tax returns.

Property Taxes may be tax deductible

Homeowners who itemize deductions on their tax return may be able to deduct property taxes on their primary residence, as well as other real estate they own. Take advantage of this deduction now, because when you file your 2018 tax return next tax season, under the Tax Cuts and Jobs Act of 2017, homeowners will be limited to deducting up to $10,000 in personal state and local property taxes.

Talk to your tax professional

Your trusted tax professional can help you determine how homeownership impacts you as a taxpayer. Be sure to ask about state exemptions, as they vary. The good news is that most changes to the tax code will not affect 2017 taxes if filed before the April 17th deadline. Although several changes that affect homeowners will go into effect next tax season in 2018. While the new law will lower the caps for itemized deductions, the standard deduction will nearly double. So unless you have enough itemized deductions to exceed the increased standard deduction, many of the changes discussed will not affect your return.

Ark-La-Tex Financial Services, LLC NMLS ID #2143 (www.nmlsconsumeraccess.org) is not a law firm, accounting firm, tax firm, or financial planning firm. This advertisement is for general information purposes only. Anyone relying on particular details contained herein does so at his or her own risk and should independently use and verify their applicability to a given situation. (https://benchmark.us)

4 Tips to Save for Your Child’s College Tuition

by I Am Benchmark

Do you have children or grandchildren? If you do, you are likely considering their higher education opportunities long before they have similar thoughts of their own. If trends are any indicator, the cost of four year and two year universities continue to rise every year. As the cost of college increases, planning and investing in your child’s future now becomes even more important.

1. Take Advantage of Merit Based Scholarships

Some families don’t fill out the Free Application for Federal Student Aid because they believe their income is too high for their child to qualify. No matter your income, it is worth filling out. Most colleges offer aid based on high school academic achievements (merit). If you don’t fill out the form, you cannot be considered for those scholarships. You can apply by visiting https://fafsa.ed.gov and clicking “Start A New FAFSA.”

2. Choose an Investment Program

A 529 college savings plan is named after Section 529 of the Internal Revenue Code. This type of plan allows you to steadily grow a designated account that is designated for college tuition and other college costs. As long as the money is used appropriately, the state-sponsored investment plan gets special tax benefits. The money invested in a 529 grows tax free and is also tax free to spend on college expenses such as tuition, books, and fees. Even if you aren’t certain that your child will attend college, it’s still a good investment because you can change the recipient of the money. A grandchild, sibling, nephew, niece, or even you can use that money for education. In some states, the money in a mature 529 account can even be withdrawn for uses other than college.

3. Enroll in Rewards Programs

Some credit cards offer a percentage back when you shop and buy gas. If you swipe a card when you dine out, a using a card with a rewards program would give you some of that money back monthly or quarterly. Although these programs typically award a very small percentage of the purchase, this money can be invested into a designated college savings account or a 529 plan. When the new graduate in your life is ready to begin their higher education, you’ll be thankful for every penny saved.

4. Ask for College Fund Contributions Instead of Socks

Tired of birthday gifts or holiday gift that seem unnecessary? Instead of asking friends and family to buy your child toys, ask them to contribute to a college tuition savings account. Many states offer tax deductions for financing a college account, even if the child is not your own.

Plan Ahead

While it may be unrealistic to work one’s way through college like in decades past, all hope is not lost. Like all investment strategies, your biggest ally is time. With the right strategy and an early start, a debt free education really is possible.

Tax Tips for Homeowners Claiming a Home Office Deduction

by Benchmark

A recent survey by the Small Business Administration indicates that nearly half of all businesses are based in American homes. These home-based businesses for the self-employed run the gamut from accounting services to providing medical care. American professionals surveyed by Telework Research Network indicate that the number is expected to grow in the next five years. With that number of Americans going to the self-employment route to earn money, it’s imperative that these small entrepreneurs know what the rules are when reporting income to the IRS. One of the primary things to learn is how to use the home office deduction. Here is a brief breakdown of the rules.

Evidence to Show that the Home is the Primary Base of that Business

To use the home deduction, the entrepreneur must use a part of the home to conduct business regularly. That part of the home must be used exclusively for business. To meet that requirement, it’s best that an actual office be set up. A good way to meet that requirement is to set up a phone, a desk, filing cabinets, a computer station and other things that are needed to conduct business in that room. All material goods in this office may be written off as expenses for the business. That would include the cost of the computer, paper, business forms and even stamps. Curtains, desks, rugs and chairs can also be deducted.

Deducting Expenses

Hooking up a phone and Internet line into the home office is a monthly expense that can be deducted. These are classified by the IRS as ordinary and necessary expenses that are essential to the business. All lawful deductions must meet the necessary expenses requirement in order to qualify as a deduction. Deducting a portion of the mortgage payments and real estate taxes is also allowed as are repairs, utilities, insurance and depreciation.

Calculating the Deductions

All deductions will be based on the percentage of the home used for business. This will be calculated by measuring the number of square feet used for business in the home. For example, if one-quarter of the home is used for business, one-quarter of all utility bills can be lawfully deducted as a home office expense. Form 8829 explains how this is done.

Keep Records

All receipts for the business should be filed away for reference when calculating the home office deduction. These deductions will be entered in Schedule C. Publication 587 titled “Business Use of Your Home” explains in detail how to keep records and what the IRS recognizes as allowable deductions.