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Federal Tax News for Individuals

Federal Tax News for Individuals

Posted on March 19th, 2024

Little Bits of Income Still Count

It’s easy to overlook smaller amounts of income when it’s time to prepare your tax return. Taxpayers must generally include all income, not just the amount they find on an employer-generated W-2 form. For example, did you make goods and sell them on an online marketplace or at a crafts fair? Did you provide and charge for services via mobile apps? Do you have any seasonal work income? What about savings account interest, dividends and investment gains? Gambling winnings are also taxable. And, of course, self-employment income is too. Make sure you provide records to your tax preparer even for seemingly insignificant amounts.

Can You Split the Mortgage Interest Deduction?

Are you buying a home with someone you aren’t married to? If so, the IRS says that you may each be entitled to deduct half of the cost of the mortgage interest and real property tax you paid. This is true even if only one of you receives a Form 1098, Mortgage Interest Statement, from the lender and/or a property tax statement from the local taxing authority.

However, certain conditions must be met. For example, the house must be the principal residence for both of you. You also must both be legally obligated to pay the expenses and you must have paid them during the year.

Health Insurance Premium Tax Credits

Just in time for tax filing season, the IRS has made several updates to (and added several new) FAQs related to the health insurance premium tax credit. This refundable credit is designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace. The size of the premium tax credit is based on a sliding scale. Indeed, those who have a lower income may receive a larger credit to help cover the cost of their insurance.

Don’t Miss Your Refund Due to an Address Change!

Did your address change since you filed your 2023 tax return? If so, it’s important to notify the IRS of your correct address for your home or business. You can easily inform the IRS of changes to your home address by filing Form 8822. For your business address, use Form 8822-B.

You can also make the change by calling the IRS, or by sending a written, detailed statement with your tax return. Just be aware that it can take weeks for the IRS to process a change. If you are expecting a refund, it may be delayed if you haven’t officially changed your address. Time-sensitive notices from the IRS may also be delayed, causing you to miss a required action. To bypass these problems, you may want to take care of this important task before we prepare your tax return. Or we’ll file the forms for you during your tax appointment.

Bunching Your Medical Expenses for a Higher Deduction

As you file your 2023 tax return, start thinking about how you can boost itemized deductions for 2024. You may be able to “bunch” medical expenses so you exceed the 7.5% of adjusted gross income necessary to deduct some costs. Say, for example, you’ve already scheduled surgery that will involve out-of-pocket expenses but still fall short of the deductible threshold. Think about scheduling elective procedures, such as dental work or Lasik surgery, and making qualified purchases that will push you over the threshold. Note that only the expenses over that amount and that aren’t covered by insurance or paid through a tax-advantaged account will be deductible.