3 Income Tax Tips From Simplified Tax That You Don’t Want to Forget
It's that time of year again! We're starting to think about gathering the paperwork for our income tax returns, and inevitably, we wonder if we're capturing all the credits and deductions to which we're entitled and if there are any big changes to tax laws that we should know about.
It's complicated stuff, so we turned to the experts at Simplified Tax and Accounting, which has eight locations across mid-Michigan, to review the most common tax topics:
What do we need to know if we sold real estate last year or are planning to sell it soon?
Nikali Luke: Typically, if you sell real estate at a gain, the IRS wants a piece of it. But if the property was your primary residence for two of the five years before the sale, you are able to exclude up to $250,000 of the gain from taxation if you are single and $500,000 if you are married. So typically, there is zero tax when you sell your personal residence.
For workers, we have been told there are tax deductions if we save for retirement, but you mentioned there are also tax credits?
Lesley Bergquist: There are. If you make a retirement plan contribution you could qualify for a credit of up to $4,000. That credit ranges from 10 percent all the way up to 50 percent of what you contribute to your retirement plan. If your income is less than $64,000 for a married couple or $32,000 for a single person, this credit might work for you.
Is it too late to contribute and still get the tax credit for 2019?
Lesley Bergquist: Actually, it's not too late. Even though we are well into 2020, you are still allowed to create and contribute to certain retirement plans. This is one of those few cases where you can consult with your tax professional and make a decision that will impact your 2019 tax return during 2020.
What type of information can you share with those who have their own business or rental property?
Lesley Bergquist: If you are a business owner or have rental properties, you are used to hearing about depreciation from your CPA. There were some changes in 2018 that are still applicable in 2019 and worth mentioning. The IRS expanded what is known as bonus depreciation to now cover both new and used business assets. In addition, the deduction is 100 percent of the purchase price versus the old rate of 50 percent.
All of that sounds a little complicated, right? If you'd like to work with a tax specialist to make sure you capture all the credits and deductions available to you, call Simplified Tax at 517-882-2441 or visit simplified-tax.com. A local company that is committed to mid-Michigan, Simplified Tax has eight convenient locations: