Posts by Mike D

www.vickerytax.com
Phone: Main 678-268-7452

Your Home. A Bundle of Tax Benefits.

There are many tax benefits built into home ownership. Here is a review of the most common. It may be worth a quick check to ensure you are maximizing your home ownership tax benefits.

Common deductions

• Interest deductibility. Mortgage interest is one of the few allowed deductible interest expenses. It is limited to the first $750,000 dollars in loans secured by your primary residence ($1 million for mortgages underwritten prior to 2018). You may also deduct points paid as an itemized deduction over the life of your mortgage.
•      Bonus: You can also deduct interest on a second home (cabin).
• Home office. If you have a qualified home office, it also creates a deductible expense. There is also a safe harbor home office simplified calculation that makes it easy to get this tax deduction.
• Property taxes. Your property taxes are also allowed as an itemized deduction. Current tax laws limit this deduction along with other taxes to $10,000 whether you are married or single.
• Free rental income. You can rent out your home for up to two weeks and not claim the income. This is a great tax break if your home is located next to a popular landmark or a major event. Many taxpayers rent out their lake home for two weeks to help reduce the cost of their home away from home.
• Home mortgage insurance. Premiums paid for home mortgage insurance are also deductible through 2020. While this tax deduction is not a permanent part of the tax code, it is often extended from year to year by Congressional action.

More home benefits!

• Capital gain exclusion. Perhaps the best tax benefit of home ownership is receiving tax-free gains. Generally when you sell property for a profit it creates a taxable event. However, if the property is your primary residence you can omit up to $250,000 ($500,000 married filing jointly) of these gains. Special rules apply, but this is a major tax benefit of home ownership.
• Better than rent. Since the housing bust of 2008, many would be homeowners are reluctant to exit their rental housing because of the perceived risk involved in owning a home. However, with the recovery of the housing market coupled with lower interest rates, now might be the right time to realize the tax benefits of owning your own dream home.

www.vickerytax.com
Phone: Main 470-839-9001

Age (not death!) and Taxes

Age does matter, when it comes to tax obligations

One of the elements that make our Federal Tax Code so hard to follow is that different laws apply to you based on you or your dependents’ age. To help you navigate through some of this maze here is a chart that outlines key ages and how it applies to your tax obligation.

Please note: These age triggers outline some of the major tax events that relate to your age. In most cases the impacted year is the year you turn the age on this chart. Example: If your qualified dependent turns 17 any time during the year, they no longer qualify for the Child Tax Credit. This chart is not meant to be all-inclusive and there are exceptions to some of these age qualifications. Use this information to know when to ask for help.

Action step. When you or anyone in your family approaches any of the ages in this chart it is a sure sign you need to spend some time understanding the tax implications of the age event. Call if this impacts you!

www.vickerytax.com
Phone: Main 470-839-9001

IRS Releases Key 2021 Tax Information

The IRS recently announced key tax figures for 2021, using information based on the Consumer Price Index published by the Department of Labor. Use these early figures to start developing your tax strategies for next year.

Tax Brackets: There are currently seven tax brackets ranging from 0 percent to 37 percent. Each of the income brackets increases between 0.71 and 1.00 percent. In 2020 the range was 1.59 to 1.80 percent.

Standard Deductions:

Other Key Figures:

Caution: Remember, these early IRS figures are prior to any potential tax law changes under consideration in Washington, D.C

www.vickerytax.com
Phone: Main 470-839-9001

Is a Tax Trap Lurking in Your Paycheck?

Does your paycheck look a little higher than normal? If so, it could be a tax trap.

The Problem

A payroll tax holiday effective September 1 was recently signed via a presidential executive order. Payroll tax holidays typically provide forgiveness of Social Security and Medicare taxes that are normally withheld from your paycheck.

This year’s tax holiday, however, is NOT necessarily a forgiveness of Social Security and Medicare taxes because the order is not yet supported by an underlying legislative action. So even if your employer removes your Social Security and Medicare tax from recent paychecks, there is a possibility you will need to pay it back at a later date. That could mean a pretty large tax bill for you in early 2021!

What you need to do

• Compare paychecks. Get your last paycheck from August and your first paycheck from September. Compare the amount of Social Security and Medicare taxes withheld from your August paycheck to your September paycheck. If the amounts are the same, then your Social Security and Medicare taxes are still being withheld.  If you notice that the amounts are different, or that no Social Security or Medicare taxes are withheld from your September paycheck, then that’s a signal you may have a tax repayment bill in early 2021.
• Remember to keep checking each paycheck. Companies are struggling to figure out if they are required to comply with the presidential executive order, payroll providers are trying to figure out how to comply, and everyone is wondering whether the tax obligation will be permanently forgiven.
• Be prepared to pay it back. If no Social Security or Medicare taxes have been withheld from your paycheck through the end of 2020, be prepared to write Uncle Sam a check to pay these taxes in early 2021. If possible, open a savings account to set aside the Social Security and Medicare taxes that were not withheld from your paychecks. When it comes time to pay your taxes, the money will be ready to go.
• Check back here for updates. There’s a chance Congress passes a law that forgives the Social Security and Medicare taxes not withheld from your paychecks. If this happens, you will have a nice start on an emergency savings fund should you need it.

If you have any questions about how this payroll tax executive order affects you, please call.

www.vickerytax.com
Phone: Main 470-839-9001

Don’t Run the Risk of a High Tax Bill!
Know when you should ask for professional help.

Before taking action talk to your tax adviser.

How many times have you seen this legal disclaimer? Unfortunately, all too often taxpayers do not follow this advice and then must pay the price with an unnecessarily high tax bill.

Here are some of the most common situations that can save you money by seeking advice before you act.

• Getting married
• Selling a home
• Donating stocks and investments
• Getting divorced
• Change in dependent status
• Approaching retirement
• Starting a business
• Managing participation in tax-advantaged retirement accounts like 401(k), 403(b), and various IRAs
• Death and birth of loved ones
• Donating high-value items
• Selling stocks, bonds, mutual funds or business property (rentals)
• An audit
• Tax-efficient transfer of your estate
• Selling or buying high value assets (art, collectibles, real estate, and small business assets)
• Determining Social Security benefit strategy

In advance of any of these events, or when in doubt, please ask for assistance. There are too many stories that include the words “If only they had talked to someone first!”