Expecting Your Taxable Income to Be Low This Year? You Can Take Advantage of It
If your taxable income is exceptionally low this year, or even if you expect not to be required to file a tax return this year, a number of tax opportunities may be available to you. But time is running short, since these opportunities will require action on your part before year’s end.
However, before we consider actual strategies, let’s look at key elements that govern tax rates and taxable income.
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It is quite common for teachers to spend their own money on classroom supplies – so common, in fact, that a few years back, Congress created a special deduction that allowed teachers to deduct up to $250 above-the-line for classroom supplies. “Above-the-line” means the deduction can be claimed whether or not the taxpayer itemizes their deductions. Although the $250 amount is subject to an inflation adjustment, there has been no increase to the limit, at least through 2018.
Remember the IRS’s promise about being able to file your income tax return using a postcard? 
This is a common question: How long must taxpayers keep copies of their tax returns and supporting documents?
If you have been procrastinating about filing your 2017 tax return or have not filed other prior year returns, you should consider the consequences, including the penalties, interest, and aggressive enforcement actions. Plus, if you have a refund coming for a prior you may end up forfeiting it.
Years ago, to prevent parents from transferring their investment accounts into their children’s name to avoid taxes, Congress created what is referred to as the kiddie tax. This counteracted the strategy of taking income from the parents’ higher tax bracket and shifting it to their children’s lower tax bracket.
Taxpayers are often confused by the differences in tax treatment between businesses that are entered into for profit and those that are not, commonly referred to as hobbies. We cover the differences in this week’s article and how it might apply to your small business.
The only interest that is still deductible as an itemized deduction is home mortgage interest and investment interest. If you are like so many others with large consumer debt, such as credit cards and car payments, you are paying high interest rates that are not deductible. If the amount of consumer interest you pay each year is substantial and you itemize your deductions, you may want to consider converting that nondeductible interest into tax-deductible interest by paying off the consumer debt with a home equity line of credit. Generally, current law allows individual taxpayers to borrow up to $100,000 of home equity and deduct the interest on that loan as home mortgage interest. This would also apply to planned large consumer purchases, such as a car or motor home. Using a home equity line to purchase these items will make the interest deductible.
Whether you already own a home or are considering buying one, you should be aware of the many tax benefits that go along with home ownership. There are plenty of reasons for owning a home, including the potential for capital appreciation and the fact that many of the costs are tax deductible, while rent is generally not.