If you’re itemizing your deductions this year, you might want to speak to a licensed CPA like LRSCPA. Let us give you a few tips for free!
Bunch Your Deductions
When your total tax deductions exceed the standard deduction ($12,550 for single filers and $25,100 for married filers), it makes sense to itemize your deductions.
A good way to do this is to bunch your deductions, a strategy that involves itemizing every other year and taking the standard deduction in the off years. By bunching as many itemized deductions as possible into one tax year, you’re maximizing the money you get back from the government.
Deductions eligible for bunching include property taxes, charitable contributions, health expenses, and others that apply on a case-by-case basis.
Donate Property To Charity
Before you sell appreciated property that would be subject to capital gains tax, think about donating it to charity for a multitude of tax advantages.
For most appreciated property, the amount of your deduction is the value of the property instead of its cost, and you avoid the tax on the amount of appreciation. The annual deduction limit for property donations is 30% of your AGI.
For any donated property, you must obtain written records from the recipient charity acknowledging the amount and date of contribution, plus the name of the charity.
Capital Gains & Losses
If you have capital gains or dividend income, you can no longer deduct ordinary and necessary investment expenses as miscellaneous itemized deductions due to the Tax Cuts and Jobs Act of 2017, however, if you borrowed money to purchase taxable investments, you may still be able to use the interest expense from the loans to reduce your investment income.
If you incurred capital losses, up to $3,000 of the losses may be used to offset ordinary income and reduce your taxes owed.
If you’re itemizing deductions, make sure you’re on top of all the available deductions related to your home. You can no longer deduct ordinary and necessary investment expenses as miscellaneous itemized deductions, subject to the 2% floor–however, if you have a second home and the total of your primary and secondary mortgages do not exceed $750,000, you may be able to deduct interest on the loan of the second home.
If you use your home as a rental property for more than 14 days per year and it qualifies as a personal residence, you can deduct the expenses related to upkeep, utilities, insurance, and others to offset any rental income you receive.