The IRS Deductions Blog

Archive for the ‘Standard Deductions’ Category

Question: Buying a house and just got married… what does this mean for us next April?

(we normally do our taxes as soon as we get the forms, so this is actually before April…)

So we close on our first house Aug 15 and we got married May 3. What does this mean for us when it comes time to do our taxes? I am not sure of the benefits of filing joint vs separate, and I am not sure what it means for us with the house. I always hear about tax breaks for buying a home… but does that still count when we own it less than half the year? And, we have always taken the standard deduction… should we do itemized now? I am just pretty ignorant of tax stuff in general. I normally just use the do it yourself tax software…

Answer: First of all, you can deduct the mortgage interest charged by your mortgage lender. You will received by January 31st 2009 form 1098 showing how much interest you paid in 2008. It does not matter if it was just one month of interest, it is still deductible.

You can also deduct the Real Estate taxes you paid. THey should also be on form 1098 or you should received a statement from the county you live in showing how much tax you paid. You should also deduct any prorated taxes collected from you at closing. They may not be on form 1098, but you should have a copy of what you paid on the closing statement. Local taxes, if any, are also deductible.

You can deduct any points you paid or the seller paid. These should also be shown on the closing settlement statement. You can not deduct attorney fees, broker commissions, etc, but they can be added to the basis of the home when it comes time to sell.

One of the best ways to see how mortgage interest changes your tax liability, is to take your tax software and open your tax return from 2007. Change from standard deduction to Itemized Deductions. You did not say which tax preparation software you are using, but I am assuming it was Turbo Tax. Open last years return and go to deductions an credits and go to the place in the software where you enter mortgage interest. In Turbo Tax it is under deductions and credits and it is the first in the list, “your home.” Make a note of what your owed or received as a refund in 2007. Then go to the mortgage interest section and add what you feel your mortgage interest will be for 2008. Recalculate the return and see what the difference is in your refund or your liability. This will give you an idea of what your taxes would have looked like in 2007 had you bought the house one year earlier. By doing this you will also get an idea whether the interest deduction will be big enough in 2008 for you to switch from the standard deduction to itemized deductions. Don’t worry about ruining last years return, because when you exit the software, it will ask if you want to save the return. Click on NO.

Using tax software is an excellent way to learn how the tax return works and how different deductions effect how much tax you owe. If all of this is just too confusing for you, I suggest you use a tax preparation service for 2008 just to make sure you are getting it correct.

Here is a good internet link to help you go through what is and is not deductible regarding the purchase of a new home. Jackson Hewitt tax service. http://www.jacksonhewitt.com/?ResourcesLibraryTopicsHomeownership You can go to H&R Block or any tax site to get the information.

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Question: Why do I owe 2009 tax?

I just found out that I owe IRS $5K for year 2009. Last year I got refund $2K. My husband and I claim zero exemption. Why I still owe 2009 tax? How can I avoid and reduce owing tax FY 2010? For both Year 2008 and 2009, we have W-2, $200 interest income, no mortgage, no kids. Nothing changed. Below are tax info of year 2008 and 2009. Please help.

Year 2009
zero exemption
Status: MFJ
No dependent
Gross income 108,615
Standard deduction 11,400
exemption 7,300
taxable income 89,391
Total tax 14,719
Total payment 9,885
Amount owe 4,834

Year 2008
zero exemption
Status: MFJ
No dependent
Gross income 31,653
Standard deduction 10,900
exemption 7,000
taxable income 28,194
Total tax 0
Total payment 2,344
Federal refund 2,344

Thank you.

Answer: I would suspect it has something to do with Obama’s new tax laws but…..Seriously when you make 100k you can afford to hire a professional to do your taxes and answer your tax questions I would not rely on the info you get on yahoo answers..

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Question: How do deductions work?

In the 2010 tax year I will be, for the first time ever, itemizing and not using standard deductions. I’m going to have many deductions, from moving expenses, to job finding expenses, to job-related depreciation expenses for cell phones and desks. I will also qualify for the first time home buyer’s tax credit. How do deductions affect tax obligation?

Answer: They reduce your taxable income. Whether itemizing will be more advantageous than claiming the standard deduction is an unknown until you “run the numbers” both ways.

Tax credits are a separate thing. A tax credit directly reduces your total tax owed.

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Question: Can I deduct personal exemptions in addition to standard deduction?

I just heard, for the first time, about personal exemptions ($3500) as a deduction for reducing your taxable income. So far, I have always deducted the standard deduction ($8750 for 2008) on my 1040EZ form. Can I use the personal exemption in addition to the standard deduction? How/where would I do that? Does this mean I missed out all these years?

Can I also use personal exemptions if I itemize on Schedule A?

Thank you very much

Claudia

Answer: The standard deduction is $5450 (single filer) for 2008 tax year. 1040EZ really makes it easy for you cuz it combines the standard deduction and personal exemption already. You are not missing out on the personal exemption.

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Question: Turbo Tax Worthwhile for Standard Deduction?

Would it be worth it to buy Turbo Tax if I just claim the standard deduction? Also, my dauther had a baby in Jan 07. She turned 18 in Feb 07. They both lived with us until July 2007. Can I claim them both? (She has no income so will not be filing any tax return).

Answer: Yes to turbo tax and yes your daughter and her baby are both your depend ants for 07. Happy holidays !

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Table 7.–Standard itemized and total deductions reported on individual income tax returns tax years 1950-2002.(Selected Historical and Other Data)(Illustration): … from: Statistics of Income. SOI Bulletin $5.95 This digital document is an article from Statistics of Income. SOI Bulletin, published by U.S. Government Printing Office on September 22, 2004. The length of the article is 1480 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web b…

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Tax Deduction: Income Tax, Gross Income, Alternative Minimum Tax, Tax Credit, Adjusted Gross Income, Standard Deduction $39.00 High Quality Content by WIKIPEDIA articles! A tax deduction or a tax-deductible expense affects a taxpayer’s income tax. A tax deduction represents an expense incurred by a taxpayer. They are variable amounts that you can subtract, or deduct, from your gross income.[1]It is subtracted from gross income when the taxpayer computes his or her income taxes. As a result, the tax deduction will lower ov…

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