March 1, 2019 Sponsored Story By Will DeJesus CPA, CIA, CISA
CEO and Co-Founder TaxTerminal.com Inc.in LIC
The tax code continues to evolve and this year the big change deals with deductions.
Recent tax reforms have eliminated several deductions, including deductions for moving expenses, tax preparation services and legal fees. In addition, the ceiling for allowable home interest deductions has been reduced to $750,000, down from $1 million.
What does this mean? It means that if you own a home or are looking to purchase a home and obtain a mortgage of $750,000 or less, you will be able to “write off” all of the interest associated with that mortgage. However, if you have a mortgage above $750,000, then that portion of the interest will no longer be deductible.
The number and amount of “deductions” that can be taken this year has been cut right back. However, filers should focus on available “tax credits,” which offer so much more.
Tax deductions work by reducing the final income that is subject to tax–thereby reducing the amount owed to the IRS. Tax credits, however, provide a one for one reduction in your tax liability. For example, if you qualify for a $100 tax credit, it reduces your final tax bill by $100.
Here are some personal and business tax credits that are available:
Personal Tax Credits:
Adoption Expense Credit – Form 8839
Child Tax Credit & Other Dependent – Forms 2441, 8812
Education Credits – Form 8863
Residential Energy Efficient Property Credit – Form 5695
Retirement Savings Contribution Credit – 8880
Plug In Electrical Vehicle Credit – Form 8936
Earned Income Credit – Form EIC IRC 32
Business Tax Credits:
The General Business Credit – Form 3800
Small Employer Health Insurance Premiums Credit – Form 8941
Credit for Employer Provided Child Care Facilities – Form 8882
Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips – Form 8846
Credit for Small Employer Pension Plan Startup Costs – Form 8881
Work Opportunity Tax Credit – Form 5884
Employer Credit for Paid Family Leave & Medical Leave – Form 8994
Credit for increasing Research Activity – Form 6765
It pays to know your tax credits!