Medical Expenses Deduction

If you want to deduct the payment for any type of medical expenditure this year, you must be aware of some new rules that apply to these types of deductions because they can affect your return. If you are looking for deductions for medical or dental expenses, you should be familiar with the following guidelines. Gross adjusted income –Your medical expenses must exceed your adjusted gross income by 7.5 percent during the current tax year.


You must itemize your deductions in order to claim any medical or dental expenses. These types of deductions do not form part of your federal tax return ‘s standard deduction.

Payments During the tax year–payments made during the tax year 2018 can only be claimed. If you pay by check, the date is usually considered the day you sent the check and not the cash date.

Out of Pocket Costs–You can not claim deductions if any of your payments have been reimbursed by a third party or insurance plan. You can only claim medical and dental expenses for yourself, your spouse or qualified dependent.

Travel–You can deduct travel costs for medical care. These may include items such as public transport payments, tolls, parking or ambulance payments. If you deliver your own transport, the standard refund rate is 18 cents per mile.

No double dipping–You can not deduct the payments if you pay for any medical or dental expenses with a Flexible Spending or Health Savings account. Generally, these payments are from plans supplied with tax – free funds.

Supporting your Parents

If you support your parents financially, the federal government wants to help. At tax time, there are a number of different tax assistance options available to parental care providers. The tax season 2018 brings a new dependency tax credit and the ability to claim a dependent from a parent. You may therefore be able to write off any medical expenses your parents have incurred and paid. There are certain requirements that you must meet to claim that your parent is a dependent, so make sure that you understand the rules before you file your taxes. Requirements for Dependent Claim The IRS has a standard definition clause for a dependency. In general, you must be responsible for more than 50% of the annual income of your parent if you want to classify your parent as a dependent.

In contrast to many other dependants, your parents must live in your household. They must, however, have a total taxable income below the $ 4,150. This excludes social security benefits, but accounts for pensions, interests, rental income, dividends and earnings. As a filer, you can not be claimed as dependent on the tax return of another person and your parents can not file a joint return if you are married. The only time your dependent parent can file a joint return with his spouse is when the return is filed specifically for reimbursement and they have no tax liability. Exemption Information If you are eligible to claim your parent as a dependent, only a little information is required when you file your taxes. The 1040 form you use to file your return has an exemption space where you would write the name, relationship and social security number of your parent.

Dependent Care Credit

If your parent required day care services and lived full – time with you in 2018, you may be eligible for the Dependent Care Credit . The credit amounts to 20% to 35% of the costs incurred, up to $ 3,000. The credit takes your income into account when calculating the percentage. There are no rules about exactly what type of care programs are eligible for the loan, but you can not claim expenses if you paid your spouse for care. You can’t value your own time, too, and try to take care of your dependent. Medical expenses You can also deduct their medical expenses if you can claim your parent as an dependent. Things such as prescription medicines or hospital bills you have paid for the benefit of your parent can be deducted. However, like your personal medical expenses, these expenses still fall under the deduction rule that they must exceed 7.5 percent of your previous year’s gross income to be deducted.

Deductions without Itemizing

Would you like to take the standard deduction? If you’re single, you watch $ 12,000. Pairs married, twice that amount. Perhaps you are considering laying down your deductions to obtain a bigger tax return. If you are, remember that you will need your medical, tax, charity and other expenses receipts. You will also need mortgage records and bank information, and you will have to comply with percentage rules and exceptions. Itemizing could be raw. It needs organization, good record keeping and a lot of patience. And it may be unnecessary, after all. You can make better use of the standard deduction and the allowable tax breaks in connection with it.

These types of deductions are explained a little more below. Above the deductions line These types of deductions are income adjustments and have no limits. You should try to accept as many of these as you can. For example, those in the 25% tax bracket can save $ 250 in taxes for every $ 1,000 deducted in excess of the line revenue adjustments. Some of the following are typical above the line deductions:

Student loan interest: You can deduct up to $ 2,500 in interest paid for yourself, your spouse or a dependent on an education loan. Single taxpayers must have an AGI below $80,000 ($ 160,000 married, jointly registered).

Jury Duty Pay: If your employer pays while you are serving, you are usually asked by the court to turn the money in. You can deduct that small amount, which you return to your employer. Alimony: may be deducted as long as you list the payments as decreed by the divorce. You must use your ex SS # and it will be checked against its return to ensure that the amount matches.

Early CD: Form of penalties using a deposit certificate can be deducted early using Form 1099-INT or Form 1099-OID.

Self – employed: Medicines and social security taxes must be paid by an independent person on both sides. You can write off half of the 15.3 per cent of your net tax income.

Health Plan: High deductible plans that you contribute to post-tax can be eligible for above the line deductions. You will submit Form 8889 for contributions to a health savings fund, even if they are made with pre – tax money, although no written off for money contributed before taxes.

When you file your taxes, it is always best to compare both deduction methods and choose the one that gives you the best tax advantage and hopefully the biggest reimbursement. You can take the complete tax season to compare your deductions and you can find that the extra time is worth.

Selling your Home

Since the real estate market is beginning to show a positive trend, it is a good time to review the tax requirements for selling a home and any related tax breaks. If you sell your primary home (the one you lived in full time), it is likely that the sale will be tax – free. Any profits from the sale of a second or third home are taxed, however.

Tax break for primary residence:

Couples who file together can receive tax – free profits of up to $ 500,000 ($ 250,000 for single filers) from their first home. Profits above the threshold are taxed at long – term capital gains rates, currently between 20% and 23.8%. The tax break applies only to people who sell their primary home and does not cover the cost of their home or improvements. This applies specifically to profits from the sale. A married couple who bought a $ 300,000 home and spent $ 100,000 on improvements could, thanks to the $ 500,000 tax break, sell up to $ 900,000 before they owed federal tax.


Homeowners can claim a tax break every two years as long as they live in the home they sell out of the last five years for at least two years. Homes that meet the requirements for eligibility can be a duplex, a condo, a boat or a mobile home, as long as they have standard plumbing, kitchen and beds. Those who have been widowed in the last two years can claim the $ 500,000 exclusion if they sell their house within two years of the passing of their spouse. Furthermore, if the homeowner is required to move due to changes in employment, health reasons or an unexpected circumstance such as death or divorce but has not complied with the two-year provision, he or she may be excluded. If you decide to use your holiday home as our primary place of residence, the rules become a bit more difficult. The IRS determines primarily the amount of time you have spent on the property and prorates the credit amount to which you are entitled. Rental units that are part of the primary property of the homeowner, such as a basement or garage, are not included in the tax credit and only the percentage maintained by the homeowner is eligible for the tax break.

Financially, the time after graduation can be tough. Starting by yourself, looking for a job, trying to pay back money you borrowed for school can all be quite stressful when it comes to budget management. Fortunately, some tax breaks can be claimed by recent college graduates to save money.

Student loan interest deduction: borrowers earning less than $ 65,000 per year can receive a full interest deduction on a student loan. Those in the interest range of $ 65,000 to $ 80,000 are entitled to a partial deduction. A borrower earning $ 55,000 per year with loans in excess of $ 2,500 can save $ 625 per tax.

Lifetime Learning Credit: taxpayers can receive an annual credit of $ 2,000 for all qualifying expenses in their own or post-secondary education of their dependents. The credit is not reimbursable, but it matches the dollar’s expenses. Expenditure of $ 2,000 or less is reduced by the lifetime learning credit to zero. Students who graduated in May may claim a portion of their tax return costs.

The American Opportunity Tax Credit is also available to students who receive $ 2,500 in credit in the first four years of post – secondary education.

Opportunities: Graduates are eligible for a variety of tax credits and breaks which young professionals often overlook. For example, the 401(k) pension schemes that allow pre – tax contributions can reduce your tax bill or a Roth IRA that taxes but does not withdraw contributions can help your tax bills. Saving is another option for a tax credit for many graduates. Those earning less than $ 18,000 per year are eligible for a tax credit of up to $ 2,000 for their savings.

It only takes a bit of research and you can find a variety of tax credits and deductions that can help you keep your money in your pocket more. Every little bit helps, particularly if you’re fresh out of school.

Figuring out the Filing Status

When your taxes are filed, you need to know what filing status you should use. There are differences between the five different options, and you will choose the one that best benefits you. Make tax time easier and faster by filing correctly. The Big Five The five different status are: single, married, separate married, householder or qualifying widow. If you meet the required criteria in more than one status, you should file using the one that gives you the highest tax benefit.

Single: Usually, if you’re not married, you would file with a single status. It is important to be aware of special circumstances that can affect individuals who file individually. Taxpayers who are legally separated, even if only in December, are considered to be individuals by the IRS. Single, unmarried persons without dependents should apply for this status, but those with dependents should consider their eligibility as head of household. Single consideration also includes divorce and annulment.

Married: married couples may choose to file a single tax return together, or they may file separately using a separate married filing. Legally married couples are only required to be married for a small part of the tax year. Couples whose union is subject to common law can also file as married if their court is recognized by the state. Partners who live separately but are not legally divorced still have to file as married taxpayers most of the time. Married couples who file their revenues jointly on a single return. These types of returns require the signatures of both parties and the couple shares the responsibility for paying the taxes. There are only a few circumstances in which joint responsibility does not affect the couple, such as innocent spousal relief, liability separation (if they have not lived together for the tax year) and fair relief. The primary filer may need to sign the return as a proxy in some cases, but must include a written explanation. This can happen when one spouse is deployed by the army.

Widowed: you are eligible to file married if your spouse died during the tax year and you did not remarry. You can then file as a qualifying widow for the following two years, provided you remain unmarried. Once you remarry, you should file with your current spouse as married. If you remarry the same year your spouse passes, you must file with your deceased spouse separately and with your new spouse a separate return.

The selection of the correct status is an important part of your tax return. This is one of the easy ways to maximize your tax benefit and benefit from all the deductions and credits offered by your ideal status.

The earned income tax credit is a way for low and moderate income families to save some money during taxation. The EITC is reimbursable and may reduce taxes owed to families working under certain circumstances to zero. If your income primarily comes from working and not investing, you are eligible. The level of income changes every year, but an expansion was granted until 2018, extending the loan to working families with three or more dependents. The IRS has set guidelines that can help you find out if you are eligible for the credit and how much you get.

2018 Eligibility requirements:

  • All income from investments must be less than $ 3,500 for the entire tax year in order to qualify for the EITC.
  • The earned income credit applies to working taxpayers that have earned income falling below certain thresholds. The qualification threshold depends on the number of persons in each family. The thresholds in 2018 to qualify for this credit include:
    • No Children:  earnings must be less than $15,270 or $20,950 if married filing jointly.
    • One Child:  earnings must be less than $40,320 or $46,010 if married filing jointly.
    • Two Children:  earnings must be less than $45,802 or $51,492 if married filing jointly.
    • Three or More Children:  earnings must be less than $49,194 or $54,884 if married filing jointly.
  • You can’t be married and file separately, or claim an exclusion for foreign earned income if you want to claim the Earned Income Tax Credit.

In addition, you can not be claimed as dependent on the return of anyone else and you must file a tax return to receive the credit. The eligibility age requirement for taxpayers without a qualifying child is 25 to 64 by the end of the year. Credit amounts The amount you receive depends on your total annual income and the number of qualifying children you claim.

You’re going to save more of your hard cash and less goes to Uncle Sam. Since money is deducted from your earnings before you see it, you can regard the EITC as a way of putting more money back into your check. From social security and Medicare taxes to withholding income taxes from your employer, you have money taken out before you even have the opportunity to spend. Use the EITC to put more money back in your wallet and make tax time for everyone a little less stressful.

The Child Tax Credit

Families working know how expensive it is to raise children. At tax time, the government offers these families some help through the 1997 child tax credit. This credit gives eligible families $ 2,000 per child under 17 years of age. Both Democrats and Republicans continued to support tax credit, which resulted in an expansion in 2001. Eligible families are now eligible to withdraw the right credit for the amount of tax they owed for the year. For example, a couple with three children can deduct $ 6,000 ($ 2,000 per child) from their yearly taxes. The child tax credit is reimbursable if the credit amount eligible for a family exceeds the amount of taxes that a family knows. This credit, known as the additional child tax credit, encourages families to work even if they receive low income, because they can claim the tax credit even if they do not owe taxes.

The most important provisions of the Tax Cuts and Jobs Act for taxpayers with children or other dependents may be changes in child tax credits. As in the previous legislation, taxpayers may claim a child tax credit for each child under the age of 17. However, the new law doubles the loan from 1,000 dollars per child to 2,000 dollars per child. Under the new law, the credit reduction does not begin until income exceeds 400,000 dollars on a joint return or 200,000 dollars on any other return. In 2018, low – income taxpayers will be reimbursed up to $ 1,400 of credit per child. Starting in 2018, taxpayers claiming child credit must show the social security number of the child (SSN) on the return. In the past, a taxpayer could give another tax number to a child without a SSN. New credit for other employees. The new law creates a new non – refundable $ 500 tax credit for dependents who are not eligible for the regular child tax credit, including children under 17 years of age who do not have an SSN.

Important poverty reduction The child tax credit has shown that it has a significant impact on poverty reduction across the United States. Last year alone, credit saved 3 million people from poverty, which includes 1.6 million children. The loan can be combined with the earned income tax credit to help raise the amount of money a family receives and help them to exceed the poverty line. Typically, child tax assistance is not available to many low – income families, and some, such as child and dependent care tax credit, are not reimbursable. The more income a family has, the less financial assistance they need.

Business Deductions

As a businessman, you are probably aware of the many deductions you may have when you file your tax return. You can deduct almost anything you buy for the company as long as it is necessary for the company. The cost must also be sensible. The deductions can really add up for small businesses and help save some on your bottom line. Think of it like this: your company falls within the 25% range and you buy a $ 2,000 computer. You can save $ 500 in a tax deduction insofar as your computer is used for business. You are not eligible to claim a personal expense deduction. Some of the most common deductions are: office costs: the maintenance of a company office can lead to significant deductions. You can deduct rents and utilities and you can deduct a portion of your monthly rent if you do not own your home if you work from home. Make sure your home office meets all the requirements in order to deduct them.

Travel expenses: business travel may be deducted as long as the journey is carried out. You can deduct airfare, accommodation and other costs. Meals you eat during business are deductible at 50 percent. If you organize your trip properly, you can even deduct half-business and half-personal costs for a trip. Transport: car and truck deductions are the most common deduction for companies. You can deduct all your business driving, except the drive to and from your home to your workplace. You can specify your costs or opt for a standard deduction of 0.545/mile. The standard deduction only requires you to track your kilometers instead of the costs of gas and repair. Meals / entertainment: In the past, companies could spend many outings. However, the IRS recently stopped these deductions unless you have a genuinely legitimate business reason to attend the event. You also need to have a thorough business discussion before, during or immediately after the event. Depreciation: Some property, such as cars, furniture and computers, is subject to depreciation and you can claim the cost gradually.

Thanks to the IRS code section 179, you are not always required to depreciate. This enables small companies to deduct the entire cost of the property and create a greater deduction at once. Supplies: If you purchase items you need to keep your company active, you can deduct them. There are also simple supply costs, such as rubber bands and paper clips, so keep these receipts. Legal costs: Probably at some point in the tax year you used professional legal services. If you had paid for these services, you can deduct the costs as long as they deal directly with the business. Insurance: property and liability insurance can be deducted if the policy applies to the business. You may be entitled to deduct part of your homeowner’s insurance if you work from a home office. Self – employed persons may also deduct health insurance expenses.

Filing Status

The status of your tax filing is one of the most important decisions you make at the time of taxation. In addition to the tax rates and the different amounts you can deduct, your filing status determines the benefits for which you are eligible. Your registration status depends on your marital status as of 31 December of the tax year and whether or not you have dependents to claim. Taxpayers married on the last day of the tax year have two options for filing: separately or jointly. If a person lives separately from his or her spouse and can claim a dependent, he or she can be eligible to file as the head of the house. Couples who have chosen to file together can use the married status and file a single return combined with income and deductions. Joint filing can save the couple cash when preparing their tax return. For couples who go through a divorce or for those who need to keep their records and finances separate, filing separately is an option.

Taxpayers who are not married on 31 December of the tax year are likely to file as singles. Those individual taxpayers who have a dependent should be aware that if they file with the head of household status, they may receive additional benefits. Head of the household status usually gives a higher standard deduction and a lower tax rate than the single status, so you should consider maximizing your benefits when applicable. Widow(er) Taxpayers whose spouse died in the current tax year should use the married status and can file separately or jointly. If the spouse died in the two years prior to the current tax year, the status of a qualifying widow should be applied. This filing status allows you to file together under the same conditions as you were allowed to do during your marriage.