USED DEDUCTIONS AND TAX INCOME CREDITS BY THE IRS

The tax law reform plan significantly increased the standard deductions, and deleted a number of tax deductions that were originally enumerated for deductions. The original “miscellaneous” tax credits are no longer applicable.

REAL ESTATE

Mortgage Insurance Premiums

If the home buyer in the United States pays a low down payment (less than 20%), the bank will usually require mortgage insurance to prevent default. Buyers can enjoy the deduction for this mortgage insurance.

Mortgage Interest Deductions

In addition to real estate tax deductible, enumeration deduction can be used to deduct the interest and points of the mortgage as the deduction item. The maximum deduction in 2018 was $750,000 and the amount is the same now. If married couples file taxes separately, the maximum deduction for mortgage interest will be $375,000.

Selling a Home

If the house held for 5 years and lived for more than 2 years is sold and profitable, the individual has a deduction of $250,000 ($500,000 for the joint tax return for couples). The portion exceeding the deduction amount must be declared as an investment gain on Schedule 1.

 

 

 

LIFE RELATED

State Tax Income Deduction

Taxpayers who itemize deductions on their federal income tax returns can deduct state and local real estate and personal property taxes, as well as either income taxes or general sales taxes. The Tax Cut and Jobs Act limits the total state and local tax income deduction to $10,000.

Cash Donations and Non-cash Donations

Any cash donation that meets the requirements of the IRS can be used for relief. As for those non-cash donations, you can use market prices to make enumeration deductions. It can also be deducted if you are a volunteer. For example, when you are volunteering for a qualified charity, you can pay for the cost out of your pocket or the mileage to and from the charity can also be deducted from the gasoline fee.

Expenses Related To Charity

For example, the cost of evaluating charitable donations or injury losses, or the cost of cars, gasoline, uniforms, parking fees, etc

Gambling Losses

Gambling income is taxable. Gambling income includes lottery tickets, lottery tickets, horse racing, and casinos, including cash wins and fair market value prizes such as cars and travel and many more. If there is a game loss, you can use the enumeration deduction to make the deduction, the deduction limit is your total gambling profit.

Accidents, disasters and Theft losses

For the disaster-stricken households declared by the President, their homes, household objects, vehicle accidents and theft losses that are not covered by insurance claims can be deducted.

Vehicle-related Statutory Fees

The regulations vary from state to state. For example, in California, the vehicle license fee can be deducted from the enumeration deduction, but the registration fee, weight fee, and air quality fee are not deductible.

 

TAX LAW

Estate Tax Exemption & Gift Tax Exclusion)

Starting from 2018, the inheritance tax allowance plus inflation and other factors have been increased from 5.6 million to 11.18 million. In addition, the annual gift tax allowance for tax exemption is 15,000 per person (Annual Gift Tax Exclusion) even currently in 2020. The annual gift tax amount will be calculated in conjunction with the inheritance tax exemption amount, and the excess will be deducted from the inheritance tax exemption amount. There is no limit on the amount of gifts between husband and wife, and there are no gift tax issues; but if the spouse is not a US citizen, the tax-free gift amount in 2020 is still limited to $15,000. Each U.S. state also has its own estate tax regulations, so don’t forget to refer to each state’s regulations.

Low-income Family Tax Rebate

The Earned Income Tax Credit (EITC) is an American poverty alleviation program designed to reward low- and middle-income workers, especially those with children. This tax credit is based on the taxpayer’s income, marital status, and the number of children raised to calculate the tax credit that can be enjoyed. The 2020EITC deductions range from $538 to $6,660. For some taxpayers, if the tax payable is less than the tax credit, you can also get a refund.

Deduction for raising children with low income

For low-income households who do not have to pay income tax, the cost of raising children can also get a refund. Those with an annual income of more than $3,000 can apply for a 15% tax refund, up to $3,000. (The U.S. Tax Reduction Program has modified this tax rebate to a permanent tax reduction, and the threshold amount is fixed at $3,000)

Health Savings Account Deduction HSA

Health Saving Account (HSA) is a tax-saving account. The money deposited in the account is tax-free, and the money withdrawn from the account to pay for medical expenses is also tax-free. HSA is a high-deductible medical insurance plan. For taxpayers with a health savings account, the amount in the account can enjoy 100% tax-free treatment in addition to paying medical expenses, which can be deducted when calculating income tax. In 2020, the personal health savings account deduction is $3,550 and the family deduction is $7,100, and an additional $1,000 deduction is available for those over 55 years.

 

MEDICAL AND INSURANCE

Medical and Dental Expenses

You can enumerate medical expenses that have been deducted from yourself, your spouse, and dependents that have not been reimbursed by the insurance company. The medical expenses that exceed 7.5% of your AGI are deductible. From 2019, it was transferred back to the original 10%.

Renovation of Houses for Medical Purposes

If you are renovating a house for medical purposes, such as increasing wheelchair-friendly entrances and exits, climbing stairs, etc., you can use these housing expenses as medical expenses in the enumeration deduction. However, if such renovations will increase the value of the property, it cannot be regarded as a deduction.

Self-employed Health Insurance Deduction

If the year is profitable, the self-employed person’s health insurance premium can be deducted, but the premium is to be used as an income adjustment item (Adjustments), rather than enumerated deduction.

 

 

 

 

EDUCATION

Lifetime Learning Credit

Even if you already have a degree, the IRS still provides a lifetime deduction of up to $2,000 per year. As long as you have further studies in the tax year, credits, activities, books, supplies, and equipment are all tax deductible. There is no requirement for class hours for this tax credit, any further education is acceptable, including universities, research institutes or even courses that do not give credits or diplomas.

Student loan interest

For student loan interest that complies with IRS regulations, the upper limit for the deduction of student loan interest in 2020 is $2,500, and this upper limit will be changed year by year. It does not apply if you file separate taxes for married couples or if you or your spouses are listed as dependents by others.

AOTC Education Fee Credit

Since 2009, the US federal government has provided a larger tax income deduction scheme, the American Opportunity Tax Credit, or AOTC, for higher education for the first four years, with a maximum of $2,500 a year.

Teacher Expenses

K12 elementary and middle school teachers sometimes need to pay for teaching materials or other related expenses, and can enjoy a personal tax reduction of $250 (if both husband and wife are teachers and jointly file tax, it is $500). Qualifications are required to work more than 900 hours in the academic year.

 

WORK

Note: The tax reform plan has deleted the work-related expenses that can be enumerated in the past.

Military Expenses

If you need to travel to a place more than 100 miles away from your home because of military service, you can deduct related travel expenses, such as transportation, room and board.

Home Office

The home office may include certain expenses as deductions. The home must meet the conditions of being regarded as the main place of business, meeting with customers, warehouse, rental or nursery, etc. in order to enumerate the bottom.

Jury Income

If you hand over the jury income to the employer (because the employer still pays your salary on the day you appear in court), your jury income can be used to deduct tax.

 

FINANCIAL INVESTMENT

Loss of Capital Gains

There are profits and losses in the investment. If you have a loss-making investment, you can declare a maximum of $1,500 ($3,000 for couples) for capital gains and losses.

Take Advantage of Pension Plan Deductions (401K & IRA)

401K and IRA can deduct the current year’s income tax (tax deductible). Opening an IRA account before the tax filing deadline can legally save tax.

Early Withdrawal Penalty

If you incur fines due to early withdrawal from a fixed deposit or retirement account, as long as you meet the requirements, whether it is a standard deduction or enumeration deduction, the fine can be deducted.

Bad Debt Deduction

If borrowing someone else’s money and failing to recover it becomes a bad debt, if sufficient and legal evidence can be provided, it can be deducted.

 

GREEN ENVIRONMENTAL PROTECTION

Residential Energy Tax Credits

If you purchase/replace solar-related power or water equipment, a certain percentage of tax income deduction is possible. You will need to use Form 5695 to declare.

Plug-in Electric-Drive Motor Vehicle Credit

As long as it is a new electric car with at least 4 wheels purchased after December 31, 2009, and the battery power is at least 4 kWh, this tax deduction can also be used. You will need to use Form 8936 to declare.