How to pay taxes in 2019: seven important questions

Every year at the time of filing a tax return, questions arise regarding tax returns. In the 2019 year, when Americans filed tax returns for the first time after changing tax laws, there were even more questions. Some tax breaks were suspended or restricted, while others were extended or introduced.

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Edition New York Times asked financial advisors to talk about the most common issues of their clients. Here are a few answers.

1. I thought I would have to pay less tax. What happened?

There is one main reason for which the tax bills of many people living in high-tax states, such as New York, California, New Jersey and Connecticut, have grown. SALT tax deductions (state and local taxes) restricted $ 10 000. This amount includes state and local income taxes, as well as real estate taxes.

“Prior to 2018, SALT was often the largest itemized deduction for most New Yorkers,” said Tina Salandra, a certified public accountant in New York City.

For example, for New Yorkers, city and state taxes often amount to almost 10 percent of their income. However, even if you paid more than $ 10 000 in city and state taxes, you can still make a tax deduction for no more than $ 10 000. Accordingly, you lose the opportunity to deduct any property taxes from the taxable base.

As a result, it will be more profitable for some families to use a standard deduction instead of detailed deductions, which eventually will be more.

Americans who own real estate have incomes ranging from 200 000 to 400 000 dollars, after the last changes they feel most disadvantaged. Although their tax rates have fallen, this, as a rule, does not compensate for the loss of their largest itemized deductions.

2. I was told that most people would see a tax cut. Why does the Tax return after returning the declaration only very little money, or in general I also need to pay extra taxes?

At the beginning of 2018, the IRS did everything possible to provide employers with recommendations on how to change tax deductions from salaries. In general, this is a decline. Since less taxes were deducted from wages, people received large sums of money.

If you belong to the group of these workers, then you will not see the usual large tax refund. You have already received this money, you just put it in a slightly higher salary in 2018.

Want to get a refund next year? Julie A. Welch, an accountant for Leawood, Kan., Suggests using IRS calculator to adjust deductions from your salary.

3. Which tax deduction should I use this year - standard deduction or itemized deductions?

Let's start with the basics: Every taxpayer has the right to choose whether to take the standard or itemized deduction. As a rule, choose the one that allows you to deduct a larger amount.

In accordance with the new tax law, the standard deduction doubled (to 12 000 for individual applicants and 24 000 dollars for families filing a joint declaration), while some detailed deductions are canceled or limited.

TurboTax estimates that as a result, almost 90 percent taxpayers will now use standard deductions, compared to about 70 percent in previous years.

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4. Have popular tax deductions and tax credits changed? What have we lost and what else can we claim?

• Deductions for a dependent (Dependent exemption): according to the previous law, families had the right to deduct $ 4,050 for each eligible child, but now this deduction has been canceled. Instead, if you have children under the age of 17, you can apply for a child tax credit, which has been increased to 2000 dollars from 1000 dollars for each child. According to Claudel Bradby, TurboTax Live Certified Accountant, more people will be eligible to receive such a loan, since it no longer works, starting with $ 400 000 income for joint applicants ($ 200 000 for individuals). The law also introduced a $ 500 loan for other dependents, among which may be elderly parents or children older than 17.
• Mortgage interest (Mortgage interest): if you want to use detailed deductions, you can deduct the interest paid on the first 750 000 US dollars on mortgage debt that was issued after 15 December 2017. This applies to the first and second homes. On a mortgage taken before 16 December 2017, another rule applies: you can still deduct interest paid on a mortgage of up to 1 million dollars.
• Interest on loans secured at home (home equity loans) or credit lines (lines of credit) currently only deductible if the debt is used to “purchase, build, or substantially improve” a home. For example, you can no longer deduct interest if you pay off a credit card debt.
• Unreimbursed employee expenses: business expenses of a number of workers who were not reimbursed by their employers, such as lessons and seminars, are no longer deductible.
• Moving expenses: workers moving to a new job, previously could deduct the relevant costs. Now this provision has been abolished for everyone, except for the military.
• Commission tax specialist (Tax preparation fees): if you used a detailed deduction, you might have previously deducted the amount charged by your tax specialist, or similar tax-related expenses, such as software purchased for electronic registration. It is worth remembering that it is no longer possible to do, unless you are self-employed.

5. Is it true that alimony is no longer deductible?

According to the previous law, alimony payers could deduct these payments from their taxable income, and recipients should have included this income in their declaration. This is still valid for divorce agreements made inclusive of December 31 2018 of the year (if the couple did not change the agreement after that). Therefore, this rule is true for returns submitted this year.

But in the case of divorces completed in 2019 and later, maintenance payments can no longer be deducted, and recipients will not need to include them in their income.

6. Is it true that small business owners can no longer deduct food and entertainment?

That's not entirely true, says Carol McCray, a certified public accountant in Brooklyn. In general, you can no longer deduct entertainment if you, for example, went to a basketball game with a client. But you can still deduct 50% of your food expenses if you're dining with clients, traveling for business, or attending a business meeting, etc. Meals don't have to be extravagant—forget tasting menus at luxury restaurants. Meals provided to employees for a meeting or company party are still 100% deductible.

There are rules that must be followed. For example, if you paid for a show and dinner in one invoice, it should be itemized—and the amount of the meal fee should be clearly stated. Otherwise, no deduction will be allowed.

7. I have taxable property. Should I review the gifts I gave to family members?

Inheritance tax affects, above all, wealthy people. The amount that can be transferred to the heirs without federal tax doubled. In 2019, it will be 11,4 million dollars per person.

But in the 2026 year, if Congress does not make significant changes, it will return to 5 millions of dollars (including inflation), as in 2017. State taxes real estate can also darken the picture. Therefore, paying a federal gift tax can now make sense

Michaela Saviano, senior manager of Deloitte Tax in Chicago, recommends that if you have investments that may increase in value, it may be better to pass them on to the next generation now. Then the property capital of a young man will grow.

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