Posted by Anthony Grosso
With the new tax bill in the works everyone’s been reaching out regarding how it’s going to affect them. Everyone’s situation is unique but we found this calculator to help ease your mind.
Trump Tax Bill Calculator
Below are some tips on how to fill out the calculator
1 ) AGI is line 37 of your tax return
2) Interest on your Mortgage – Schedule A line 15
3) Charitable Contributions- Schedule A line 19
4) State & Local Income Tax & Property Taxes- Schedule A Line 9
Compare taxes owed under the new plan to what you owed in 2016 by going to Line 63. There are still other factors on your return that can affect your bottom line but this gives a general idea.
Weather like today makes me value being able to work from home. Not having to leave the house in hazardous conditions is a plus but being able to take advantage of the home office deduction on my tax return is a bonus.
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes.
Starting January 1st 2013 the IRS came out with a simplified option. This new simplified option can significantly reduce recordkeeping burden by allowing a qualified taxpayer to multiply a prescribed rate by the allowable square footage of the office in lieu of determining actual expenses.
If it’s more beneficial to use the regular method you must determine the actual expenses of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. However do not forget about deprecation recapture when you decide to sell your home.
Consult with a CPA for more information in regards to home office deduction and cost of depreciation recapture.
Here are a few things that triggers the IRS to dig a little deeper into your returns:
1. Once you start to make over $200,000 Your audit risk goes from 1 in 100 to 1 out of every 27 returns.
2. IRS matches all W-2s 1099s so make sure you report this income. A mismatch will generate a notice.
3. Make sure your charitable contributions are proportionate to your income. If not, it will raise a red flag.
4. Taking higher than average deductions- have the proper documentation for your deduction.
5. Claiming rent losses as a real estate pro and having substantial W-2 income.
6. Schedule C is the money shot for the IRS. Be sure to keep accurate records on big deductions for meals, travel & entertainment .
7. Claiming 100% business use of a vehicle.
8. Home Office Deduction- You must use the space exclusively and regularly as your principal place of business.
Reach out to Capri & Co. if you have any tax or finance related questions.
Here are some of the tax implications of hiring a nanny or sending your child to day care:
1) Day Care: You can claim the child-care tax credit if you pay for care for children younger than 13 while you work. You can count up to $3,000 in qualifying child-care expenses for one child, or up to $6,000 for two or more children.
If your employer offers a dependent-care flexible spending account, that may be a better deal. You can set aside up to $5,000 a year to cover child-care costs for children younger than 13. The money you contribute to an FSA escapes income taxes, Social Security and Medicare taxes. You might be able to take advantage of both tax breaks.
2) Hiring a Nanny: You must withhold and pay Social Security and Medicare taxes if you pay a household employee $1,800 or more a year. To pay these nanny taxes there’s lots of paperwork involved.
What savings vehicles are best?
Savings Account: Monthly deposits of $100 for 21 years with an interest rate of 0.48% compounded annually you would have a final savings balance of $26,506.42. This is clearly not outpacing inflation with its current average of 3.22%
529 Plan: Money put in grows tax deferred as long as it’s used for qualified education purposes. The funds can continue to grow indefinitely until they are used.
Brokerage Account: Stocks can teach investing sills for late in life. This type of account you have more options and less restriction on what and when the money can be used. As the child gets you can teach them about companies, educate them on the financial world and teach them how the stoke markets work.