It’s tax season and most of us are hoping to shave a few bucks off our tax bill. Well, many are not aware of the deductions that are available when it comes to medical expenses.
If you spent over 7.5% of your adjusted gross income on unreimbursed medical expenses during 2018, you may be able to deduct what you spent over this 7.5%, according to the IRS.
So, for example, if you make $100,000 a year, 7.5% would equal $7,500. So let's say you spent $10,000 on medical expenses, subtract the 7.5 % ($7,500) from $10,000, and the remaining $2,500 is tax-deductible.
But the expenses made can also include those of your spouse, children and dependents. Combined, these could qualify you for descent deductions.
Publication 502 breaks down what services or items you purchased in 2018 that are tax-deductible and which are not. Here’s a brief summary:
Tax Deductible Items:
Unfortunately the following cannot be written off:
So review the list and see what you can apply to your 2018 itemized deduction worksheet. But make sure you have your receipts and logging of car mileage…. and start keeping track this year as well!
With the Republicans’ tax bill set to become law on Jan. 1, you have just a few days left to prepay your 2018 property taxes before the federal cap on your state and local tax deduction goes into effect. The Republicans’ tax bill will cap the state and local tax deductions on federal tax returns at $10,000.
Thomas Mould, a certified public accountant of Valley Accounting and Tax in Apple Valley, Minn., said the $10,000 cap applies to all state taxes, including income tax. So if you pay a combined $10,000 in state and local property taxes and state income taxes, you’ll probably want to prepay your 2018 property taxes today.
Most people don’t have a state and local tax bill over $10,000, but those who do should take advantage of the uncapped deduction for property tax payments one last time. People living in high-tax states like New York and California should be the first to jump at the opportunity. Oregon, Maryland and Minnesota also have high income tax rates, but some states are still sorting out how they’ll handle pre-payment of property taxes and whether they will recognize the deduction.
Some states have made their intentions clear. Oregon, for example, is not allowing or recognizing prepayment of property taxes. However, New Jersey’s Governor just issued an executive order allowing the prepayment and deduction at the State level.
Mould said three of the four counties he contacted in Minnesota will take a prepayment on 2018 property taxes but wouldn’t tell him whether that prepayment would be recognized as income by the County, ensuring deductibility by the IRS. So states are scrambling to find answers for citizens with just days to determine whether prepaying 2018 property taxes will payoff for them next year. Small businesses shouldn’t be as confused, though.
“If the business itself...is subject to taxation, then there’s no limit on the state taxes. But if all the taxes are paid at the personal level, then the $10,000 cap would apply,” Mould informed.
Translation: if your business is taxed as a corporate entity, then the $10,000 state and local tax cap doesn’t apply to you. But if you run a sole proprietorship, then the $10,000 cap on your state and local tax deduction does apply.
So do your due diligence and determine whether prepaying your 2018 property taxes will save you money come tax season next year, and if you intend to start a sole proprietorship in 2018, keep in mind that your state and local tax deduction will be capped at $10,000, and it might be worth paying your 2018 property taxes ahead of time.
If you like this, you might like these Genesis Communications Network talk shows: USA Prepares, Building America, Free Talk Live, American Survival Radio, Jim Brown’s Common Sense, Drop Your Energy Bill, The Tech Night Owl