Question: I own or just purchased a new home.
What can I deduct on my tax return?
Answer: The most common deductions are as follows:
Question: I own a business. Should I buy a car or lease a car?
Answer: For some reason, people believe that leasing a car makes the car more deductible than if the car is purchased. This is not the case. In fact, you almost always pay more money for the car in the long run if you lease it rather than if you buy it. The only time that leasing makes sense for tax purposes is if it involves a very expensive car and you put very little miles on the car. If the car is inexpensive or you use it heavily, then purchasing the car is definitely the better way to go.
Question: What is the difference between an employee and an independent contractor?
Answer: The IRS does not allow you to choose whether a worker is an employee or an independent contractor. There are certain guidelines that dictate the status of a worker. There is a questionnaire that the IRS provides that they look at to determine a worker's status.
Employees usually have the following characteristics:
Independent Contractors usually have the following characteristics:
Question: I moved this year. Can I deduct my moving expenses?
Answer: In general, out-of-town relocations are usually deductible. In-town moves usually are not.
In order to deduct moving expenses, you must switch jobs. The new job must be 50 miles further from the old home than the old job was from the old home.
If you are out of work or if you just graduated from school and relocate out-of-town to take a job, the relocation will usually be deductible as long as it is at least 50 miles.
You can also relocate and then find a new job and deduct the moving expenses. In fact, you can deduct the moving expenses as long as you are actively looking for a job even if it takes you a while to find one.
For purposes of the moving expense deduction, if you relocate and start a new business, then that will be considered your new job.
Question: I just bought a house. Can I deduct the closing costs?
Answer: Certain closing costs, such as mortgage points, are deductible regardless of whether they are paid by the buyer or seller. After closing on a house, you will receive a Hud-1 Settlement Statement (also know as a closing statement). On page 2, lines 801 and 802 (Loan Origination Fees and Loan Discount Fees), if any amount appears on either of these lines in either column, then you can deduct them. Other closing costs, such as transfer taxes and title insurance, are not deductible in the current tax year but are added to the basis of the house.
Question: I sold my house and made a profit. Will I have to pay tax on my profit?
Answer: In most cases, no. If you live in your house for at least two years during the most recent five year period before selling it, then the gain will be tax free up to $250,000 for single people and up to $500,000 for married people.
Question: I filed my taxes late but I am due a refund. Will I be penalized?
Answer: No. You will not be penalized for filing your taxes late as long as you don't owe any money. However, please be aware that you must file your tax return within three years of the due date (including extensions) in order to claim a refund. If not filed within this deadline, then the refund will be forfeited.