As another year unfolds, 2020 has been caught with catastrophic events that affected various sectors of our society. Due to the ongoing COVID-19 pandemic, the government and even the private sector paused momentarily until the current virus onslaught will clear our way. Nevertheless, this doesn’t exempt us from our tax obligations. The least that we can do is to know how to prepare and submit for tax deductions that we are legally qualified for.
April has arrived, and you may not notice this could pass swiftly before us with a blink of an eye while we are busy protecting ourselves while on lockdown. But you can make the process stress-free for yourself and make sure that you save money as well.
Now, if you’re wondering what tax deductions you can qualify for, the following is a list of expenses that you should take into consideration for San Diego tax preparation.
Medical and Dental Bills
For now, we can’t afford to go to the hospital or avail of home care due to quarantine rules that might save us better than being exposed to hospitals that even front liners are suspected of potentially spreading the disease. Medical, including dental, expenses are a burden if we don’t have some buffer money to spend for them. The good news is you can qualify for medical expense deduction. If you refer to the Publication 502 of the IRS, you will see the full list of medical expenses that are deductible. This year, the 7.5% hasn’t changed.
This amount equivalent to that percentage based on your gross income will be calculated accordingly. The following list is a snippet of what are included of the deductible payments covering medical and dental expenses:
- Medical professional fees, which include doctors, dentists, psychiatrists, surgeons, and other professionals in the medical field
- Hospital care
- Prescription drugs
- Dental services, optical services
- Health insurance premiums shouldered by you (but if the expenses have been reimbursed through the insurance company, it is not deductible)
- Transportation expense incurred during medical checkup
Fees for Tax Preparation – Self-employed
Take advantage of tax deductions by reducing your tax bill if you are self-employed. Though this may sound a lot of paperwork, you can always prepare for taxes with the help of tips from Hoffman and Associates. The fees associated with the process of tax preparations include electronic filing or working with our San Diego accountants.
Deductions from Home Renovations
If you have plans on adding a deck, a patio, or a landscape garden, you think that home improvement is a promising undertaking but plans to do it because of the added value when planning to resell your home, you may be mistaken if you can gain a tax credit for it.
When it comes to tax credit on home improvement, there are only two renovations that may qualify; if you’re home is to be upgraded because you are putting up energy-efficient equipment, such as solar panels and similar projects; the other is when you tailor fit your home to accommodate a person with disabilities–this could be anyone from your family including yourself.
Military Personnel – Moving Expenses
Members of the military who are on active duty are eligible for moving expenses if they have received an order to transfer location or move permanently to a place where the personnel may reside on a permanent station. However, the move should transpire within 1 year before ending your active duty status or within the allowable time under the Joint Travel Regulations.
Baggage Fees – Airline – Self-Employed
Only the self-employed can claim for tax rebates incurred for baggage fees and if you travel frequently. If you are not employed you can opt for airlines that offer low baggage fees if you have no way to avail tax deductions on this matter.
Mortgage Deductions – Interest
Mortgages can be very expensive for families but the good news here is that you can get a tax deduction based on this factor. For married couples filing together, they can stand to deduct their interest on all loans that come up to the amount of $750,000 or less. If you’re filing your taxes separately, you can only deduct interest from loans that come up to $375,000 or less.
Sale of Your Home
In San Diego tax preparation, the profit you generated from the sale of your home or other real estate property can also be excluded. For married couples who are filing together, they can exclude profits of up to $500,000 or less. For single filing, you will only be eligible to deduct up to $250,000 or less of the profit from your overall income.
Expenses Associated with Investments
The option where investors could claim expenses such as custodial fees for the IRA, costs associated with accounting, and investment advice is no longer available for 2018. However, you can claim deductions for interest expenses. This relates to the interest which is paid on all the money that is being borrowed for taxable investments which can be purchased. Keep in mind that the overall amount is capped at the net total of your income from taxable investments per year.
Losses in Gambling
The tax rules for gambling remain unchanged. This means that if you incurred losses related to gambling, you can include them. But you can only make deductions based on the total amount of the gambling income which you have reported. Additionally, make sure to include proof to substantiate claims of losses in San Diego tax preparations.
Alimonies are not included in the receiving spouse’s income if the divorce was made or implemented after the 31st of December 2018. This also includes those divorced before December 31, 2018 but modified after the said date, but with the following adjustments:
- Modifications in the terms of separate maintenance payments or terms of the alimony
- States that payments or alimony are not included in the income of the receiving spouse
If you’re paying alimony as part of your separation or divorce decree, you qualify for a tax deduction if you meet the following conditions:
- Make payments with check, cash or money order
- Do not file taxes with your former spouse or spouse
- You have separated legally and no longer live in the same house
- You’re not making payments for child support.
- All payments are being made to support your former spouse or estranged spouse
However, always pay attention to other local rules and laws which might apply for San Diego tax preparations.
Contributions to Health Savings
Contributions that are being made in traditional IRA accounts can qualify for a tax deduction if your spouse or you do not have a retirement account that is employer based. In San Diego tax preparations, deductions are also not allowed for Roth-based IRA contributions. However, if you meet the criteria outlined, you can easily get a deduction that matches the full amount and can range from $5,500 to $6,000, particularly if you are 50 years old or older.
Contributions to 401(k) Plans
Making contributions to a 401(k) plan is always encouraged by employers, but you’ll be grateful to discover that you also get tax benefits when you contribute to it. In short, you can easily get immediate taxable benefits by lowering the total amount of your income. This also means that your take-home pay is not impacted by contributing.
Dependent Care – Flexible Spending Account
The Flexible Spending Account (FSA) is a way to provide qualified employees to use tax-free money for medical expenses not covered by any health insurance plan. The option to sign up has begun in 2019 but not all employers are offering their employees this option. During the 2019 plan year, an employee can shell out a max of $2,700, a $50 increase from 2018.
FSAs provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, many employers are offering their employees the option to sign up for an FSA this fall for participation that begins in 2019.
Tuition fees and educational expenses can be claimed by you or your spouse or a dependent declared in the tax return was a student attending or having attended an eligible institution.
The amount of deduction is only based on the current year of the academic period you have paid for or the first three months of the following year. To be able to claim the deduction for education expenses for your dependent, the expenses must have been paid in the current year and must declare the student as your dependent on your current tax return.
Home Offices – Self-Employed
If you’re using your home as a home office, you can deduct a certain amount of bills and expenses in relation to it. However, this option is only valid if you’re using that part of your home exclusively for work purposes. Additionally, for San Diego tax preparation, you must also show that you have made your home to be the principal location for your business. While this was an option that was previously open for all businesses, it now only applies to self-employed individuals.
Corporate Cars – Self-Employed
For business use, if you are primarily using your corporate cars, you can deduct your costs associated with the upkeep, fuel and mileage of the car. You can also estimate your overall cost for the car by the actual expense method. In any case, you need to provide proof of the car’s usage and you also have to ensure that you’re self-employed to qualify for this tax deduction.
Travel Expenses – Business – Self-Employed
Expenses incurred by self-employed individuals while travelling due to your business are also deductible in your taxes. These include the costs associated with meals, business calls, transportation, lodging, and more. Travel arrangements that are extravagant or will not always qualify for tax deductions for business-related purposes.
These aren’t the only tax deductions you can qualify for. Make sure you look up all that you can qualify for in San Diego tax preparation. When you pay attention to all of them, you will find that you can actually save a lot of money in the process. Start your tax preparation earlier so that you have plenty of time to find out about more benefits you are qualified for.