Tax Benefits | Nesteggg Accounting

Tax Benefits Renewed for 2019

Certain individual tax provisions extended

Deduction for above-the-line qualified tuition and related expenses claimed on Form 8917, Tuition and Fees Deduction
Deduction for mortgage insurance premiums treated as qualified residence interest, claimed on Schedule A, Itemized Deductions
Deduction for unreimbursed medical and dental expenses as the floor was lowered to 7.5% of adjusted gross income and claimed on Schedule A, Itemized Deductions
Credit for nonbusiness energy property claimed on Form 5695, Residential Energy Credits
Income exclusion for canceled debt for qualified principal residence indebtedness where the taxpayer defaulted on a mortgage that they took out to buy, build or substantially improve their main home claimed on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness

Taxpayers can get the most out of various tax benefits and get useful tips on preparing their 2019 federal income tax returns by consulting a free, comprehensive tax guide available on IRS.gov. Publication 17, Your Federal Income Tax, features an in-depth look at on tax changes for 2019 including recent legislative changes and covers the general rules for filing a federal income tax return. It supplements the information contained in the tax form instruction booklet. This 277-page guide – available online as a PDF, HTML or eBook − also provides thousands of interactive links to help taxpayers quickly get answers to their questions.

Kiddie Tax modification

Recent legislation also modified the rules related to what’s commonly called the “Kiddie Tax” for certain children who may be able to calculate their tax based on the tax rate of the child’s parent. For tax year 2019, taxpayers can elect this alternative application for the tax on their unearned income by completing Form 8615, Tax for Certain Children Who Have Unearned Income, differently depending on their election. See the Form 8615 instructions for Part II Tax for more information. Taxpayers who make this election for 2019 must include a statement with their return specifying “election to modify tax of unearned income.” The statement can be made on the return (for example, on line 7 or at the top of Form 8615) or on an attachment filed with the return.

Disaster tax relief

Disaster tax relief was also enacted for those affected by certain Federally declared disasters. This includes an increased standard deduction based on qualified disaster losses and an election to use 2018 earned income to figure the 2019 earned income credit and additional child tax credit.

Certain taxpayers affected by federally declared disasters may be eligible for an automatic 60-Day extension for filing, paying their taxes, and other administrative deadlines.

Special rules may apply for taxpayers who received a distribution from an individual retirement arrangement, profit-sharing plan or retirement plan and their main home was in one of the federally declared disaster areas eligible for these special rules.

Amended returns

Three tax laws were enacted on Dec. 20, 2019. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 extended certain previously expired tax benefits to 2018 and 2019 and provided tax relief for certain incidents federally declared as disasters in 2018 and 2019. The extended benefits and the disaster relief may now be claimed on 2018 and 2019 tax returns, by those who qualify.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act) made other changes, such as increasing the penalty for failing to file a tax return and modifying the rules related to the taxation of unearned income of certain minor children. The SECURE Act relaxed certain retirement plan contribution and distribution requirements beginning Jan. 1, 2020.

While the IRS has released the vast majority of tax year 2019 products, the IRS must also update 2018 tax products affected by these legislative changes. Taxpayers may have to file an amended return to claim these benefits on their 2018 return. See Form 1040-X, Amended U.S. Individual Income Tax Return, and its instructions at IRS.gov/Form1040X. Impacted 2018 forms, instructions and schedules are being revised to reflect the legislation enacted Dec. 20, 2019. The updated 2018 revisions will be posted to IRS.gov for taxpayers to file amended returns accurately.

The IRS works closely with tax professionals and partners in the tax return preparation and tax software industries to prepare for and address issues that may occur during the filing season. This ongoing collaboration ensures that taxpayers can continue to rely on the IRS, tax professionals and tax software programs when it’s time to file their returns. As always, filing electronically and choosing direct deposit is the fastest, most accurate and most convenient way to receive a tax refund.

For Small Business Week, IRS offers tips to small business owners about the overlooked home office deduction

For Small Business Week, IRS offers tips to small business owners about the overlooked home office deduction

The Internal Revenue Service today reminded small business owners who work from a home office that they may be overlooking a common deduction.

The IRS encourages small business owners to explore the guidelines surrounding home office deductions so they understand the legal guidelines and options available. More details are available in Publication 587.

As part of National Small Business Week (April 29-May 5), the IRS is highlighting a series of tips and resources available for small business owners. For someone considering claiming the home office deduction, there are two options available:

Regular method

The first option for calculating the home office deduction is the regular method. This method requires computing the business use of the home by dividing the expenses of operating the home between personal and business use. Direct business expenses are fully deductible and the percentage of the home floor space used for business is assignable to indirect total expenses. Self-employed taxpayers file Schedule C, Profit or Loss From Business (Sole Proprietorship), and compute this deduction on Form 8829, Expenses for Business Use of Your Home.

Simplified method

The second option, the simplified method, reduces the paperwork and recordkeeping burden. The simplified method has a prescribed rate of $5 a square foot for business use of the home. There is a maximum allowable deduction available based on up to 300 square feet. Choosing this option requires taxpayers to complete a short worksheet in the tax instructions and enter the result on the tax return. There is a special calculation for daycare providers. Self-employed individuals claim the home office deduction on Schedule C, Line 30, and farmers claim it on Schedule F, Profits or Loss from Farming, Line 32.

Regardless of the method used to compute the deduction, business expenses in excess of the gross income limitation are not deductible. Deductible expenses for business use of a home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs. In general, expenses for the parts of the home not used for business are not deductible.

Deductions for business storage are allowed when the home is the only fixed location of the business, or for regular use of a residence for daycare services; exclusive use isn’t required in these cases.

You may be able to save money with education tax credits

You may be able to save money with education tax credits If you’re paying education costs for yourself, a spouse or a dependent, you may be eligible to save some money with education tax credits.

Higher education costs paid in 2017 can mean tax savings in 2018. Here are some facts about key tax breaks for higher education.

The American Opportunity Tax Credit (AOTC) is:

• Worth a maximum benefit up to $2,500 per eligible student.

• Only for the first four years at an eligible educational or vocational school.

• For students pursuing a degree or other recognized education credential.

• Partially refundable. People can potentially get up to $1,000 back.

The Lifetime Learning Credit (LLC) is:

• Worth up to $2,000 per tax return, per year, no matter how many students qualify.

• Available for all years of postsecondary education and for courses to acquire or improve job skills.

• Available for an unlimited number of tax years.

To claim the AOTC or LLC, use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). Additionally, if you claim the AOTC, the law requires you to include the school’s Employer Identification Number on this form.

Here are a few more facts to add to your notes:

• You’re required to have Form 1098-T, Tuition Statement, to be eligible for an education benefit. You receive this form from the school you attended. There are exceptions for some students.

• Eligible educational schools are those that offer education beyond high school. This includes most colleges and universities.

• You may only claim qualifying expenses in the year paid.

• You can’t claim either credit if someone else claims you as a dependent.

• You may need to reduce the amount of your credit based on the amount of income you receive.

• You can’t claim both the AOTC or LLC for the same student or for the same expense in the same year. • The Interactive Tax Assistant tool on IRS.gov can help you check for eligibility.

• See IRS Publication 970, Tax Benefits for Educa

Tax Benefits Renewed for 2019

For Small Business Week, IRS offers tips to small business owners about the overlooked home office deduction

You may be able to save money with education tax credits

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