Tax Deductions are virtually gone but Tax Credits are alive and well !!!!!
It Pays to know your Tax Credits !! !!!
by Will DeJesus CPA, CIA, CISA
CEO and CO-founder TaxTerminal.com Inc.
The recent tax reform has eliminated non-reimbursable tax deductions along with moving expenses, tax prep fees and the legal fees deductions. In addition, they have reduced the allowable home interest deduction to only deducting the interest resulting from 750K of home debt down from 1 million. What does this mean? … It means that if you own a home or are looking to purchase a home and obtain a mortgage of 750K or below, you will be able to “write off” all of the interest associated with that mortgage. However, if you have a mortgage above 750K then that portion of the interest will no longer be deductible. These are all reductions to “deductions” however we should also keep an eye on “Tax Credits.”
Although deductions are a favorable way to reduce your taxable income therefore allowing for your tax rate to be applied to a smaller tax basis, Tax Credits can be far more favorable if you qualify. Tax deductions reduce your taxable income and can translate to a reduction of your effective tax rate however tax credits are a one for one reduction in your tax liability. For Example…if you were to take a tax deduction of $100, it could translate to a savings of approximately $15.00. On the flip side, if you were to find a $100 tax credit that you qualify for, that can be worth as much as $100.
Here are some Personal and Business tax credits that are back for the 2019 Tax Season:
- Adoption Expense Credit – Form 8839
- Education Credits – Form 8863
- Child & Dependent Care expense Credit – Form 2441
- Child Tax Credit & Other Dependent – Forms 2441, 8812
- Residential Energy Efficient Property Credit – Form 5695
- Retirement Savings Contribution Credit – 8880
- Plug In Electrical Vehicle Credit – Form 8936
- Earned Income Credit – Form – Form EIC IRC 32
Business Tax Credits:
- The General Business Credit – Form 3800
- Small Employer Health Insurance Premiums Credit – Form 8941
- Credit for Employer provided child care facilities – Form 8882
- Credit for Employer Paid Social Sec and Medicare Taxes on Certain Employee Tips – Form 8846
- Credit for Small Employer Pension Plan Startup costs –
- Work Opportunity Credit – Form 5884
- Employer Credit for Paid Family Leave &Medical Leave – Form 8994
- Credit for increasing research activity – Form 6765
It Pays to know your tax Credits !!!!
Will DeJesus CPA, CIA, CISA
Founder & CEO
TaxTerminal.com Inc. LiC