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itemized deduction

Home Equity is Not a License to Spend

Many homeowners find themselves in a beneficial position a few or many years into their mortgage. As their payments continue, their mortgage balance gradually lessens and generally their home equity increases. It may be tempting to view this increase in equity as a license to spend. In other words, individuals may be tempted to start spending on wants versus needs and no longer delay gratification. A few arguments can be made in favor of using your homes equity in order to make purchases. Such arguments include home remodels, purchasing vehicles, taking vacations, and paying for college. Additionally, some may argue that if interest rates are low, one could use home equity and invest in the stock market – profiting from the spread of market gains and the loan interest. Further augmenting these arguments is the fact that the interest on a home equity loan may be tax deductible. Let me […]

Tips for Tax Time

Given that it the start of tax season and individuals will be gathering and preparing their 2015 tax return information, I’d thought I’d put together some basic tax tips. Individuals may consider thinking about these items in order to have a smooth and (hopefully) stress-free 2015 tax season. Additionally, I’ve included a link to our 2015 Tax organizer. Please feel free to use it at your convenience to get your “tax ducks in a row”. Furthermore, please let us know if you’d like us to prepare and file your taxes for you. Many current clients have found Blankenship Financial to be cost effective and efficient compared to other big-named tax preparation services. As Enrolled Agents both Jim and I are well qualified to handle most tax matters and returns. And now with the tax tips… Beware the non-tax man cometh! Each year we field calls from clients and prospective clients […]

Vacation Home Rentals and Your Income Taxes

You may have a vacation home that you only spend a small amount of time at each year, and the rest of the time you rent the home out to other folks who wish to vacation in your little slice of heaven. The rents that you receive is considered taxable income, to the extent that it exceeds the applicable expenses. Plus, if the vacation home is partly used for your own purposes, the expenses (allocated to the time the property is rented) cannot exceed the amount of rent income from the property (you can’t claim a loss). here are some tips on collecting rent on time. Recently the IRS issued their Summertime Tax Tip 2015-03 which details some tips you should know about Vacation Home Rentals for your tax reporting purposes. IRS Tips about Vacation Home Rentals If you rent a home to others, you usually must report the rental income […]

Should You Pay Off Your Mortgage Early?

As individuals pursue the American Dream of buying their first or next home the question may arise on whether or not it’s a good idea to pay down the mortgage and have no mortgage debt or pay the normal monthly payment and invest the extra money that would have gone to pay down the mortgage early in a place (the stock market) that offers the potential for higher returns over the long run. There are many fierce advocates for paying off debt, any debt early. While this is a wise choice regarding high interest debts such as credit cards, student loans and other high interest loans it may not necessarily be the case for home mortgage debt. Here’s a situation where for some folks it may make sense to pay down early and for others they may wish to consider invested the extra money elsewhere. Generally, the younger a person […]

Charitable Donations

This time of year many people find it in their hearts to give. They’ll give to friends, family, loved ones and charitable organizations that can help maximize the gift such as a church, charity, or foundation. Last week I had written about the law of reciprocity and giving, and this week I’d like to mention how you can make your giving work in favor when tax season rolls around. As of this writing there are about 11 days left in 2013. Some individuals will be looking to see how much they can give or how much more they can give in order to receive the biggest tax deduction they can for charitable giving. Of course, gifts to friends and family are not deductible, but there are times when gifts or donations are completely deductible and may be to the tax advantage of the person giving or donating the gift. According to […]

3 Reasons to use the new safe harbor home office deduction and two reasons not to

Home office workers! In case you hadn’t heard about it, the IRS made some changes to the way the home office deduction works for 2013.  Essentially, you are now allowed to deduct a flat $5 per square foot of dedicated office space, with a maximum of 300 square feet.  But this new “safe harbor” option isn’t for everyone.  Listed below are three reasons this may be good for you, and a couple of reasons that you might want to use the old method. 3 Reasons It’s a Good Thing Depreciation recapture not needed any longer – if you are just starting out taking the home office deduction, you can forget about this concept of “depreciation recapture”.  This is a required add-back (actually basis reduction) when you sell your home.  If you took the old-style home office deduction, including depreciation of your home office space, you’ll still need to keep records of […]

Tips When Renting Out Your Vacation Home

If you have a vacation home that you only use during for brief vacations throughout the year, you might have entertained the thought of renting out the home to defray some of your expenses.  Using a property for mixed purposes – that is, partly as personal and partly as a rental (business use) – can lead to some complications with regard to your income taxes. This is due to the fact that the income earned from renting out the property is likely to be taxable income, which you will need to report on your income tax return.  Of course, you’re allowed to deduct the expenses that are related to the production of income, and then you’re only taxed on the net income after the deductions. The IRS recently published their Summertime Tax Tip 2013-08, which provides some of the guidelines to keep in mind if you’re going to rent out […]

Financial Record Storage and Safekeeping

We’ve all got reams of papers, paystubs, receipts, sticky notes and possibly even old matchbook covers with important financial information stored on them.  It’s important to keep some of these documents safe, in order to provide proof of purchase, documentation for deductions, and the like.  You never know when a significant event could occur in your home that could put these documents at risk.  Fire, flooding, tornadoes, blizzards, and three-year-olds can emerge out of nowhere and could possibly destroy your important documents.  We’ve discussed how long to keep these documents in the past.  Recently the IRS published their Summertime Tax Tip 2013-04, which details some recommendations for safe storage of your documents.  The text of the Tip follows. Keep Tax and Financial Records Safe in Case of a Natural Disaster Hurricanes, tornadoes, floods and other natural disasters are more common in the summer. The IRS encourages you to take a […]

IRS Announces A New Home Office Deduction Option for Tax Year 2013

For folks who work out of their homes, including home-based businesses and telecommuters among others, there is a new alternative available starting with the 2013 tax year for claiming the Home Office Deduction. This new method saves a lot of extra recordkeeping and simplifies the filing process considerably. In the past (including tax year 2012 which you’ll file by April 15, 2013), to take the home office deduction you are required to fill out Form 8829, Expenses for Business Use of Your Home. This form requires you to compile all of your expenses for your home and then allocate those expenses to the portion of your home that is used “regularly and exclusively” for business purposes. IMPORTANT NOTE: For your 2012 tax return (which you’re filing in 2013) you must use Form 8829 as usual. The new method will be available on your 2013 tax return which you’ll file in […]

Deducting Job Search Expenses On Your Tax Return

Searching for a job can get expensive.  These days, let’s face it, if it’s not you, someone you know is on the hunt for a new job.  Did you realize that at least some of those expenses can be deducted on your income tax return? Recently the IRS distributed their Summertime Tax Tip 2012-06, which discusses some of the important facts you need to know about tax-deductible job search expenses.  I’ve added a few explanatory comments to help you get more out of the Tip.  The text of the Tip can be found below: Job Search Expenses Can Be Tax Deductible Summertime is the season that often leads to major life decisions, such as buying a home, moving or a job change.  If you are looking for a new job that is in the same line of work, you may be able to deduct some of your job hunting expenses […]

Sales Tax Deduction Expires After 2011

For the past several years, it has been an option for taxpayers that itemize their deductions to choose between deducting state income tax or a formulaic estimate of their state and local sales tax, plus the specific sales taxes on any “big ticket” items, such as automobiles. During 2009, there was a new wrinkle added, part of ARRA 2009: for this year only, if you purchase a vehicle between February 17, 2009 and December 31, 2009, you can deduct the sales tax (within a liberal limit) “above the line”, in addition to, your standard or itemized deductions. (see this link for more specifics) These two provisions are currently set to expire at the end of the 2011 calendar year.  It is unclear how much impact the new, 2009 auto sales tax deduction has had on the automobile industry (which was the primary reason behind this deduction) – so it is […]

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