Tax filing season is up and running, this year with a bit more stability in the air.
The Consolidated Appropriations Act passed by Congress and signed by President Obama in December made permanent 50 individual and business tax deductions — including the state sales tax deduction so important for Texans — that for years had been available only on an annual extension status.
“For the first time in years, we can do tax planning with our clients,” said Walt Hatter, a Fort Worth CPA. “Before we didn’t have any certainty.”
The state sales tax deduction — which was reinstated into the tax laws in 2004 — is one of the biggest of the permanent changes for individuals, Hatter said.
The deduction is available to all who itemize their taxes, but is especially helpful for residents of states like Texas that have no state income tax to deduct. The IRS provides a table to find the sales tax deduction amount based on your income and family size so you don’t have to add up all your sales slips.
But remember to add on sales tax from any big-ticket items like a new vehicle, boat, mobile home, aircraft or materials to build a home, Hatter said.
Other deductions and credits that are now permanent include:
IRA charitable transfer. Those age 70-and-a-half or older can directly withdraw up to $100,000 from an IRA to a charity without affecting their adjusted gross income or having to pay taxes on the amount, Hatter said.
American Opportunities credit. This tax credit of up to $2,500 is for each qualified student for whom you pay qualified tuition.
Child tax credit. Families with children under age 17 can take a $1,000 per child tax credit. Phaseout begins with adjusted gross income of $110,000 for joint filings or $75,000 for single filers.
Earned Income Tax Credit. This tax credit for low-wage earners now has some permanent features. Last year, more than 7,100 tax returns prepared through United Way of Tarrant County’s VITA program brought in $5.22 million in this tax credit for filers, according to Sue Matkin, director of the program.
Teacher supply credit. Teachers can take a non-itemized deduction for classroom expenses up to $250. The deduction will be indexed to inflation starting this year.
Other tax deductions or credits were extended, but not made permanent, Hatter said. Among them:
▪ The deduction for private mortgage insurance, used when a home buyer does not have all of the required down payment, was extended for the 2015 tax year but not made permanent, Hatter said. PMI is generally not reported on your 1098 mortgage tax form, so you must find out from your mortgage company how much of your monthly escrowed payment is PMI to deduct it.
▪ An above-the-line deduction for tuition and fees for students in higher education was extended for two years.
▪ In a boon to homeowners who want solar or wind power, Congress passed a five-year extension of the investment tax credit for solar and wind power projects.
The move extended a 30 percent tax credit of the value of solar projects, including solar panels and water heaters, extended through 2019 and then declining until 2022, when it will be eliminated.
The 30 percent wind tax credit will continue through 2019, then diminish each year, before disappearing in 2020.
In a conference call with reporters last week, IRS Commissioner John Koskinen said those preparing taxes online will see new security requirements, especially when you sign in to your tax software account, to better protect personal information from tax ID theft.
New standards include a minimum 8-digit password using a combination of letters, numbers and special characters. There also will be new security questions, new lock-out features and new ways to verify emails.
And taxpayers will have an extra weekend to prepare taxes, which won’t be due until April 18 this year because of Emancipation Day in Washington, D.C. on April 15.
Teresa McUsic’s column appears Saturdays. TMcUsic@SavvyConsumer.net
Where to get help
AARP Tax Aid. AARP’s program has 35 sites locally in public libraries and senior citizen centers where trained and certified volunteers provide tax preparation and electronic filing to anyone, regardless of age or income. Call 211 to find a location or go online at www.aarp.org and search for the Tax Aid Site Locator. Appointments recommended; walk-ins are welcome. Starts Jan. 26.
United Way VITA. The Volunteer Income Tax Assistance program by United Way of Fort Worth started this week at 14 sites in Tarrant County offering tax preparation for elderly filers or those with incomes of $54,000 or less, disabilities or limited English. Spanish and Vietnamese tax preparers available. Call 211 for site location or go to www.FreeTaxDFW.com. More volunteer preparers are needed and training is ongoing.
Free File. The IRS also provides free tax software and e-filing through its Free File program for those with household incomes of $62,000 or less. Software comes from commercial preparers including TurboTax and H&R Block. Spanish versions available. Go to www.irs.gov/freefile.
TaxAct. Free online tax software for all incomes available at www.TaxAct.com. The Cedar Rapids, Iowa, software provider also provides free e-filing and tax help via email.