Follow Karen Linkedin Twitter Facebook
Email Karen Email
Financial
Jan 19, 2018

New Tax Rules: A Q&A

Sponsored Content provided by Karen Durda - President, Enrolled Agent, Century Accounting and Tax Services, Inc.

Many questions came to us during the conferences that cobbled together two bills, and we had no answers.
 
In the next few articles I will simplify the tenants that are the most common to individuals. Businesses are a separate set of issues/questions. 
 
With this information, you can ask us or your professional tax preparer on your specific income:
 
Q: I used to use Schedule A, Itemized Deductions. Now they are saying that I cannot use this to lower my taxes.
 
A: Actually, this was one of the benefits to the tax bill, as those folks who previously barely had enough to itemize or could not itemize at all.
 
The standard deduction is now as follows:
 

Filing Status Deduction Amount Explanation
Single $12,000 Unmarried individual or those who lived apart from spouse more than 6 months during the year
Head of Household $18,000 Unmarried individual with dependent(s)
Married Filing Jointly $24,000 Legally married, not Domestic Partners
Married Filing Separately $12,000 Legally married but not filing with spouse

Note: Those over 65 years of age get an additional $1,250 added to their standard deduction.
 

Q: I have children under 16 years old and now they say I get no extra deductions reducing my income.
 
A: You are referring to exemption amounts, and yes, that has gone away. But in its place is additional credit for children under 17. The credit has doubled to $2,000 per child.
 
In addition, if your income is wiped out by the standard deduction and credit for children, up to $1,400 of the credit will be refunded to you. High-income earners will now be able to take advantage of this credit to assist in the offset of taxes, as the income limit is now $400,000.
 

Q: What about family members who live with me? I could get an exemption for them before.
 
A: If your family member qualifies as your dependent and is not your child (parent, sibling, etc.), you will receive a $500 credit reducing your tax liability.
 

Q: Back to itemizing. I have a home mortgage and property taxes. How does this affect me?
 
A: The good news is that if you had home mortgages of $1 million dollars or less (held before Dec. 15, 2017) and you have more than the standard deduction, you can still itemize. Home equity loans that were in place prior to the bill are also able to be deducted, only if the original loan was for remodeling or repairing your home. Your property taxes paid on your residence are also allowed.
 

Q: What was this about state tax not being deductible?
 
A: This is not referring to property tax; it is referring to the state and local taxes you pay, generally from your W2 withholding, and previous-year tax bills from your individual state return. This deduction is capped at $10,000.
 
 
Q: Medical bills? I haven’t been able to take that deduction in years.
 

A: Under the old rules, you had to spend more than 10 percent of your income on medical bills before you could claim a deduction. The new rule lowers that percentage to 7.5 percent!
 

Q: Can I still give to my favorite charities?
 
A: Of course, just remember that if you do not itemize under the new rules these are truly gifts of charity you are giving and not a way to lower your taxes.
 

As a takeaway, let us remember that itemized deductions do not equal dollar-for-dollar tax savings!

Karen S. Durda, EA, President of Century Accounting and Tax Services, Inc., has been in the profession since 1984. As an Enrolled Agent credentialed by the Treasury Department, she has the rights as afforded by Congress to represent individuals and businesses before tax authorities. Since May 2012, she has also had the distinction of being a Dave Ramsey Endorsed Local Provider, assisting in budgeting and financial peace for a four-county area and parts of Myrtle Beach.As a Qualified Business expert with the New Hanover County courts, she has experience and knowledge of various scopes of professions and industries, such as medical, health services, legal, construction, retail, real estate, auto sales and service, insurance and restaurant. Continuous tax law courses throughout the year keep her up-to-date on all tax rules, regulations and law changes, as well as business trends, to better serve her clients.
 

Century logo final 11918114327
Ico insights

INSIGHTS

SPONSORS' CONTENT
Susan 2 april242017

Divorced? You May Be Eligible for Boosted Retirement Benefits

Susan Willett - Old North State Trust, LLC
Burrus rob headshot 300x300

Rising Prices, Unit Sales and Housing Inventories

Robert Burrus - Cameron School of Business - UNC-Wilmington
Dave hoff heashot 300x300

The Exit Room: A Simulation Made for Learning Agility

Dave Hoff - EASI Consult

Trending News

Trampoline Park To Open Saturday At Mayfaire

Johanna Cano - Aug 16, 2018

Company Begins Moving Into New Wilmington Space

Cece Nunn - Aug 16, 2018

ACME Plans More Space For Growing Workforce

Christina Haley O'Neal - Aug 17, 2018

In The Current Issue

Woman Owned Businesses On The Rise

Women are starting and growing their businesses at a rapid pace in the state, including in a variety of sectors in the Wilmington area....


Program Addresses Funding Gap

A program designed to help female entrepreneurs bridge the funding gap drew a number of local startups this year....


Report: Most Affordable Beach Housing

Brunswick County’s most populated beach town is also the most affordable, home sale statistics show....

Book On Business

The 2018 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2018 Power Breakfast - Dishing on the Restaurant Biz
2018 WilmingtonBiz Expo - Keynote Lunch with Eric Dinenberg, Rouse Properties
2017 Health Care Heroes