Welcome back from Eagles madness! Tax filing season is upon us.
File early, partly due to the horrific Equifax hack of 2017, advises Michael Gillen, director of the tax group at Duane Morris. Make sure the cyber-criminals don't get our refunds before we do.
This year's filing deadline is Tuesday, April 17. April 15 falls on a Sunday, and April 16 is Emancipation Day in the District of Columbia.
Free filing. The IRS offers free filing if your adjusted gross income was $66,000 or less in 2017. Options are available through Free File at IRS.gov:
Claim the Earned Income Tax Credit (EITC). This can increase refunds for taxpayers earning less than $54,000 in 2017. Qualifying families with three or more children may get a credit of more than $6,000.
Nearly 200,000 Philadelphians already claim EITC, but over 40,000 more are eligible. That leaves more than $100 million in tax credits unclaimed, said Mike Dunn, spokesman for the city's Department of Revenue.
The average federal EITC refund in Philadelphia is $2,500, and the maximum benefit is $6,318. Don't know if you qualify? Philly residents can text FILE to 99000, or go online to the website IRS.gov/eitc. or at www.YouEarnedItPhilly.com, Call the city's help line at 215-686-9200 for more information on EITC and a list of tax preparation sites.
Capital gains tax rates. The maximum tax rate for long-term gains is 20 percent for taxpayers in the highest bracket (39.6 percent for 2017), but remains at zero percent for taxpayers at or below the 15-percent bracket and at 15 percent for all others.
State and local income taxes not limited … yet. For 2017, all state and local income taxes and property taxes are still deductible. In 2018 tax season these will be limited, so capture all of your state and local income taxes paid or withheld in 2017, and all property taxes. Don't forget to deduct sales taxes on big ticket items (boats and cars).
Your 2017 mortgage interest may be fully deductible. Mortgage interest, including points (or loan origination fees) paid on primary homes purchased in 2017 and paid on mortgages up to $1 million to buy, build, or improve your home, are still deductible. So is interest on up to $100,000 of home equity loans.
Medical expense deductions enhanced. You can still deduct qualified medical expenses that surpass 7.5 percent of your adjusted gross income for 2017. That will be true for 2018 as well. But in 2019, taxpayers may deduct only medical expenses over 10 percent of their adjusted gross income.
Standard mileage rates. The standard mileage rate is 17 cents per mile for medical and moving purposes, down from 19 cents for 2016, and remains at 14 cents per mile for charitable purposes.
Maximize retirement savings. Maximize your retirement plan contributions, especially if your employer matches your contribution. IRA deductions may be available. The overall contribution limits remain the same in 2017, at $5,500 for a traditional or Roth IRA, with an additional $1,000 available for those over age 50.
Alimony's still deductible in 2017 (and should be included in the income of the recipient) and will be in 2018 as well for a divorce agreement entered into before Dec. 31, 2018. Also, for alimony recipients, remember to deduct the portion of your lawyer's fees that involves settling the amount of alimony. Your lawyer has to give you an invoice, Gillen said.
American Opportunity Tax Education Credit. Up to $2,500 of credit per student is deductible for qualified higher-education expenses, such as tuition and books. Student loan interest also remains deductible for 2017 up to a maximum of $2,500. Both phase out at incomes of $80,000 for single filers and $165,000 for joint filers.
Adoption. The maximum adoption credit increased to $13,570 for out-of-pocket expenses for the legal adoption of a child in 2017.
Home office. If you operate a home office, or use your office as the exclusive location where you see clients, you may be entitled to deduct a portion. It's best if the home office is a separate structure on your property, but at minimum, it cannot serve any other purpose, such as a guest bedroom or television room.
Entertainment expenses not gone…yet. The new law eliminates the entertainment expense deduction for businesses, but you can deduct these expenses for one final year.