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Another reason to use standard: audit If you get selected for an audit of your itemized deduction or a specific category (e.g. all medical expenses or all charitable contributions) then at best you have the time to send in all the receipts, and then answer questions about some. At worst, the auditor disallows something and now your itemized is less than the ...


63

Congratulations on an amazing rise on salary. Please pat yourself on the back for such an accomplishment. The best thing you can do is to hire a competent tax specialist. Here in the US, it is typically an accountant and they would tell you that there is not much they can do. Maximizing tax favored retirement accounts is about the best one can get away ...


44

At the end of 2017, President Trump signed into law the Tax Cuts and Jobs Act with among other things eliminated the federal tax deduction for state taxes paid. The state and local tax (SALT) deduction was not eliminated, it was capped ($10,000 for 2018). ~90% of the people that benefited from the deduction had income over $100k. So capping it limits ...


23

The state tax deduction lets you deduct state taxes paid from your taxable income for calculating the federal tax that’s due, not from the federal tax paid. Suppose you pay state taxes of $2,000 and your marginal federal tax rate is 30% — your deduction from the amount paid in federal taxes is $600, not $2,000. The justification is that money paid in state ...


21

From the Maryland tax web site: https://taxes.marylandtaxes.gov/Individual_Taxes/General_Information/What_s_New_for_the_Tax_Filing_Season.shtml Should I take the standard deduction or itemize? - The federal tax reform of 2017 significantly raised the federal standard deduction. Under current Maryland law, if you take the standard deduction the federal level,...


21

As void_ptr clarified you won't be worse-off itemizing with deductions equivalent to standard deduction because the state refund is only taxable to the extent that the deduction benefited you. Interestingly, it can actually make sense to itemize even with deductions lower than the standard deduction. For example, in Maryland you cannot itemize at the state ...


15

According to Maryland State Law, the Maryland standard deduction is $2,250, and you may not itemize in Maryland if you choose the standard deduction on your federal return. Therefore, choosing to itemize will increase your federal taxable income slightly (and therefore your federal tax burden), but will reduce your Maryland taxable income by potentially up ...


12

No! You can't take a tax deducton on tax*. Which is what the $40k is. Tax isn't normally tax deductible when you pay it on time. Paying it late doesn't somehow make it more deductible. Whether those interest and penalties are deductible is another question, but the same answer. * You can often deduct taxes paid to other entities, such as your state ...


11

From the IRS web site To claim your child as your dependent, your child must meet either the qualifying child test or the qualifying relative test: To meet the qualifying child test, your child must be younger than you and either younger than 19 years old or be a "student" younger than 24 years old as of the end of the calendar year. The accountant is ...


10

You have many questions in this question; try to focus down to one question and it is more likely to be answered. To address your question: why would any state in their right mind not impose state taxes Presumably you mean state income taxes. I live in Washington State, which has no state income tax. There are many ways to measure characteristics of ...


10

Can i write this off as a tax deduction? No. You're buying coffee. The coffee costs the same whether you use WiFi or not, therefore the WiFi has no attributable business cost. If you were buying internet access rather than coffee, then yes. I agree that the 50% business meal expense does not apply since you aren't traveling or conducting meetings. The ...


10

I have used the phrase "Don't let the tax tail wag the investing dog" and it applies here as well. The tax break means this; your cost of a loan is reduced from 4.5% (that's about the 30 year rate today) to 3.06% (this is the net if you are in the 32% bracket.) Now, we can also discuss whether you are saving to your 401(k), $19,000 limit this year, ...


10

Yes, you can decrease your tax burden by suffering business losses. The only expenses you'd be claiming would be actual spending you do. So, if you spend $100 in advertising and have $0 revenue, you have $100 in losses which saves money on taxes but costs you money in total. The exception to this is home office expense, since you are already paying rent. If ...


9

The original idea was this: The federal government taxes your income, but if you send your income on to somewhere else that is in the public interest, you wouldn't need to be taxed on that money, as you were already giving it to somewhere that benefited society. This was the thinking not only of the State and Local Tax deduction, but also of the Charitable ...


9

You are mixing up two different kind of taxes here. What the craftsman pays and adds on his invoice is VAT. He adds this to every bill. The craftsman would have no way to know when and if you are eligible for any returns and if you reached the yearly cap (afaik ~6000€) already from other jobs. You later deduct the total costs for work done from your income,...


9

1. Everyone gets a $24,000 deduction. Great so far. Yes, the married filing jointly folk have a $24k standard deduction for 2018. 2. If you like, you can instead take your mortgage interest as a deduction. (Obviously you would not do this unless that interest is $24,001 or more.) The other common itemized deduction is state and local taxes paid (SALT), ...


8

Combined federal and state marginal tax rates can easily be 40-50%. The tax owed is reduced by the amount of the deduction times the marginal tax rate.


8

To try and answer all of your questions, Can I enter this amount in Tax Returns? Yes, but at the end you have to choose between the total of your itemized deductions (charitable contribution plus others such as mortgage interest and state taxes) and the standard deduction, you cannot add charitable contributions on top of the standard deduction. How ...


8

There is at least one state (Virginia) where one can only itemize the state tax if one itemizes federal taxes. So you might prefer to itemize the federal tax so as to be able to itemize the state tax if it makes no difference at the federal level. This of course assumes that you would get more at the state level by itemizing than taking the state standard ...


7

My first question is, why did the federal government ever do this? Isn't this just another way of transferring money to states? There's also a purely mathematical reason for the federal govt to allow deduction of state and local taxes (ESPECIALLY SALT income taxes) from your federal tax income: in theory if tax rates were high enough, and no SALT deduction ...


7

The expense occurs when you pay it, so the expense would be deductable for the year of that January. (Source: working with a tax accountant last year when I was in a similar situation. Disclaimer: I am not an accountant.) Additional source, IRS pub 502, at the end of page 2: You can include only the medical and dental expenses you paid this year, ...


7

Nobody polices this until audit time, at which point you will need to justify your valuation to the IRS. A single error among many good valuations is unlikely to result in action, but a pattern of donating items and overstating their value will. Go to eBay. Search for items like yours. On the left edge, will be a number of filters. You want "...


7

No, in like manner to how you aren't required to report your medical expenses to the government- unless you are claiming that deduction, or report your charitable contributions, business expenses, etc. Reporting requirements focus around things which affect your taxes owed. Withhold information about your income, on the other hand, and you are liable to ...


7

Minimizing taxes at your scale is more an exercise in determining which activities the government decides to tax less rather than an exercise in finding clever loopholes to exploit. You lack the resources (and the tax burden) to make use of the more intensive tax avoidance strategies in a feasible or efficient manner. Sorry, but no tax havens, no accountants,...


6

No. It is what it is. There is very little you can do once Dec 31 has passed. If you are able to deduct a deposit into an IRA, that's an option. Short of that, there's no choice to simply claim income in the next year.


6

The tax deduction is for the total interest paid during the year. If you have no better use for this money, for example, a deposit into a retirement account (through your employer) to capture a matching deposit, your best option is to simply pay the highest rate loan.


5

I expected this was to budget out their quarterly taxes This seems very unlikely. C Corps are required to use the accrual accounting method, which means that their tax is determined by when their revenue and expenses occur, not necessarily when they pay their invoices. Even very large non-C corps probably user accrual accounting just because it's easier to ...


5

In addition to @Daniel's answer: I think the political reason is to combat black market work. Prelimiary finding: It is a well-known phenomenon [in Germany, but probably not restricted to Germany] that pointing out that something can be deducted from taxes will induce people to spend money [I'm talking net spending]. There's a lot of black market work = ...


5

You want to do what's called a recharacterization of your 2018 Traditional IRA contribution to Roth IRA. Contact your brokerage and they should be able to handle it for you. You will get a Form 1099-R reporting this, but basically it will be like you had originally contributed to a Roth IRA. The reason why you'd do this instead of a conversion (T. M.'s ...


5

One method you can use to find the value of some items is to look for similar items on eBay. When doing this, there are a few important things to remember: The comparison item should be in the same condition as yours. Don’t use the price of a new item if you did not donate a new item. If you are looking at an auction that has not closed and has no bids, ...


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