Income Tax Planning and Tax Returns

The 2018 income tax law made many changes.  One very prominent change is the doubling of the standard deduction.  The standard deduction varies by the taxpayer’s filing status; it is not the same for all taxpayers.  The impact of this change is partially, but NOT fully reduced by the elimination of personal exemptions.  While many individuals may not longer be able to itemize deductions, that could be a blessing in disguise.  The doubling of the standard deduction will give a client the financial benefit of the higher deduction, without the hassle of having to itemize or risk of IRS audit and IRS questioning of the itemized deductions taken.  Clients who already are itemizing at double the amount of 2017 and earlier levels may still be able to itemize, BUT will not benefit from the increased amount of standard deduction.  Moreover, such clients in addition lose the benefit of personal exemptions.  The 2018 tax changes favor persons who don’t itemize, or don’t itemize much in excess of the previous standard deduction amount.

Tax issues related to itemized deductions:

  1.  Deductibility of expenses for elderly persons in assisted living.  Expenses of staying in assisted living can be either A) limited to a fairly modest percentage of the total expenses, via an expense ratio that only covers direct nurse/medical costs, and does NOT include any allowance for the portion of the costs allocable to room and board or meals; OR B) the total expense may in some situations be deductible.  The criteria for determining whether the costs are fully or only partially deductible are complex; and there is a tax memo available for clients to review this detailed material.  To obtain a copy of the memo, simply fill out the website’s contact form and indicate in the comments that you desire a copy of the tax memo relating to deductibility of assisted living expenses.
  2.   Charitable contributions.  Taxpayers MUST have at the time of claiming charitable deductions certain documentation.  If a taxpayer takes charitable deductions as itemized expenses but DOES not have the required documentation the deductions will be disallowed upon audit.  Worse still, there have been a number of cases in tax court and other courts, where taxpayers have been hit with penalties (or even frivolous case penalties PLUS the regular penalties).  The required documentation for charitable expenses depends upon the amounts deducted and the type of charitable contributions.  The documentation requirements are  complex; and there is a tax memo available for clients to review this detailed material.  To obtain a copy of the memo, simply fill out the website’s contact form and indicate in the comments that you desire a copy of the tax memo relating to deductibility of assisted living expenses.

Energy credits:  There are credits available against income taxes for taxpayers installing alternate sources of energy:  Solar, Wind, high efficiency HVAC (this is not a complete list).  These credits are due to expire in a few years, but in the 2018 income tax law changes at least were renewed to in existing expiration dates (there was some speculation that the incentives might be terminated early in the 2018 changes, but that didn’t happen).  The availability of such credits is subject to a number of important limitations.  To get more information on such credits (whether you have already installed the energy saving items, or are just considering it), simply fill out the website’s contact form and indicate in the comments that you desire more information on energy credits (also indicate the type of energy savings investments that you have installed or are considering installing).

Our sister company, Bergelin & Murphy, LLC, also has a website with a primary focus on tax matters. It highlights only tax and financial planning, while this website (Frank Murphy Attorney and CPA) includes estate planning and estate settlement topics, in addition to tax topics.

Below are links to information from the Bergelin & Murphy website:

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Click on any of the report categories listed to find practical, unbiased information to help you reach your financial goals.

(Frank P. Murphy is an attorney Board Certified by the Florida bar in Wills, Trusts, and Estates; he is also a CPA.  The services he offers are “Wills, Trusts, Estates, and Tax Returns.”)

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