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 […]
itemized deduction
Deducting Medical Expenses from Your Income
Among the types of expenses that are allowed to be deducted from your income is expenses that you’ve paid for medical insurance, medical care, and certain other expenses. This can get a bit complicated to understand what expenses are deductible, and the IRS recently issued a Tax Tip that will help you to understand how it all works. The complete text of IRS Tax Tip 2013-25 is listed below. Seven Important Tax Facts about Medical and Dental Expenses If you paid for medical or dental expenses in 2012, you may be able to get a tax deduction for costs not covered by insurance. The IRS wants you to know these seven facts about claiming the medical and dental expense deduction. You must itemize. You can only claim medical and dental expenses for costs not covered by insurance if you itemize deductions on your tax return. You cannot claim medical and […]
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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 […]
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IRS Sets 2013 Standard Mileage Rates
For several different categories of deductions, there are standard rates set by the IRS for mileage. The deductions are for business-oriented mileage, both for your own business and for miles driven on behalf of an employer (if deductible), as well as for medical purposes, deductible moving costs, and for charitable activities. These rates are set on a “per mile” basis. The IRS calculates the applicable costs associated with driving these miles on an annual basis, which includes the cost of fuel, maintenance, insurance, taxes, and the purchase price of the vehicle (or rather, depreciation). This allows for a much more simple method of deducting these costs rather than adding up all of the costs of a vehicle and then allocating an appropriate portion to the deductible use. You can choose between using the mileage rate or adding up all of the costs for your vehicle use, but once you’ve started […]
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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 […]
Sterling Raskie, MSFS, CFP®, ChFC®
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