Tax Tips

The tax laws change frequently. We want to provide you with tax help and resources to make the process easier to understand. That’s why we’ve prepared a list of tax tips we hope you will find useful!

If you don’t find answers to your questions, please give us a call at (317) 897-9964 or contact us online. One of our tax professionals will be happy to assist you!

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Tips for Filing Your 2019 Taxes

The tax code is complicated and can change dramatically.
Please consult your tax professional for expert advice.

IRS Urging Taxpayers W-4 Review

The Internal Revenue Service is urging taxpayers to review the taxes their employer is withholding to avoid having too much or too little withheld. Generally, for each allowance change you make, your refund will increase or decrease by $300 to $600. Not sure what to do? The professionals at Fiscal Tax are happy to provide a FREE W-4 Review.

Indiana Return

  • Contribute to the Indiana College Choice Plan and receive a Tax Credit of 20% of your contributions up to a maximum of $1,000. The money can be used for grades K – 12 as well as college.
  • Don’t forget, Indiana allows you to deduct the first $3,000 you paid in rent and the first $2,500 of property taxes.
  • Indiana allows a $1,000 deduction for each child who attends a
    private school; parochial school; or is home schooled for grades
    K-12.

Itemized Deductions

Must exceed the standard deductions of $24,400 for Joint returns, $18,350 for Head of Household, and $12,200 for Single taxpayers.

  • State and Local Taxes are limited to $10,000.
  • Mortgage Interest is fully deductible, but interest on a home equity loan is only deductible if it’s used for home improvements.
  • Donations are fully deductible.
  • Medical Expenses in excess of your adjusted gross income.
    Important – the median annual cost of an assisted living facility is $35,000, and more than $85,000 for nursing home care. If you, your spouse or a dependent needs this type of long-term care, you may be able to deduct these expenses and reduce your income tax
    liability – possibly down to $0. As you might expect, the rules are complicated. We can help.

ROTH vs Traditional IRA: Which is Better for You?

ROTH IRAs tend to get a lot of hype, and for good reason, because you pay the taxes upfront and your eventual withdrawals are completely Tax-free. Traditional IRAs give you a tax break now and, in many situations, will put more money in your pocket than a ROTH would.

The trade-off is an uncertain future tax liability possibly even decades from now. Given enough time and/or a high rate of return, you may be better off with a ROTH.

Earned Income Credit (EIC)

In 2019 there is an increase on EIC for taxpayers with one or more qualifying children. The EIC reduces the tax you owe and gives you a refund even if you do not owe any tax. For tax year 2019, the maximum credit is:

– Three Children $6,557             – Two Children $5,828

– One Child $3,526                     –  No Children $529

– Indiana Credit $571

Education Credits

The American Opportunity Credit can increase your refund by up to $2,500 per student. Also, you could qualify for a $1,000 refund even if you had zero income, but you cannot claim it if you could be a dependent of your parents. The tax break is allowed the year you pay the tuition even if you used a student loan to pay for it. Form 1098T is required.

Child & Dependent Tax Credit

  • The tax credit is $2,000 per child age 16 and under, and the income phase-out is much higher with the new tax law.
  • The tax credit is $500 for dependent children and other dependents age 17 and older.

Student Loans

  • The deduction for Student Loan Interest can ease the burden of payments for student loans. If you pay interest on a qualified Student Loan, you are generally able to deduct the interest expense up to $2,500.
  • Discharged loans are generally treated as added income. However, there are now exclusions for: Death, Permanent Disability, and
    working for a certain period of time in specific professions.

Make the RMD from Your Traditional IRA Tax-Free

  • The tax code allows you to donate directly from your IRA account up to $100,000 per year in Qualified Charitable Distributions (QCDs).
  • The QCD donated money escapes Federal income taxes and will also lower your Indiana and county taxes by over 5% of the contributed amount.
  • Double-Dip. You get a double-dip when you don’t itemize deductions. The non-itemizing taxpayer creates a deduction where none existed before.
  • Other benefits may include: Lower Medicare premiums and lower tax on your Social Security benefits.

Teachers

There is a $250 deduction for teachers spending their own money for classroom supplies.

IRS and/or State Notices

If you receive a notice from the IRS or the State, don’t assume that it is correct and automatically pay it. Many notices just require you to give additional information to show why you do not owe additional taxes or penalties. Always call Fiscal Tax when you receive tax notices.

Business Deductions for Sole Proprietorship, S Corporations, Partnerships and, Rental Income

  • Qualified Business Deduction (QBD). Generally you can deduct 20% of profit from your income.
  • Standard Mileage Rates. The 2019 rate for business use of your vehicle is 58¢ a mile for the entire year. It’s extremely important to have a mileage log or all deductions could be disallowed.
  • No Entertainment expenses are deductible for 2019.
  • Business meals and Client Prospect Meals are 50% deductible. The expense must be ordinary and necessary. You must keep track of your business meals all year long so you have the proof you need for the deduction. Keep the receipt that shows the name of the
    restaurant, the name of the people at the table and a record of the reason for the meal.

Need a Copy of Your Tax Return?

The Internal Revenue Service charges $50 for a complete copy of your tax return. However, Fiscal Tax retains our client returns for 10 years and is available year-round to provide FREE copies whenever you should need them. Simply call 317-897-9964 or stop by our main office at 9465 E. Washington St. in Indianapolis.

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