Home Office Deduction

 This deduction is still available to the self employed if you use an area in your home exclusively for your business. A $5 a square foot deduction up to $1,500 a year can be taken. However it is not available to W-2 employees even if they would otherwise qualify because of a change in the tax law. For 2018 through 2025 such W-2 employees cannot take a home office deduction even if they are working at home. See IRS publication 587-Business use of your Home, for more information. 

Charitable Donations in 2020 and 2021

 On your 2020 tax return, each return (single and joint) can have a $300 tax deduction for cash donations even if you take the standard deduction. For 2021 you can have a $600 deduction for cash donations for joint returns with a standard deduction. 

Zoom

 I now have zoom capability so if you would prefer to have an online meeting to discuss your tax situation we can do so. In office meetings are also available. 

Stimulus (economic impact payments)

 You have to report the stimulus payments made to you by the government on your 2020 tax return. The IRS calls it a recovery rebate credit, and there is a worksheet that determines if you were not paid enough based on your 2020 adjusted gross income. The stimulus payments were based on your 2018 or 2019 tax return. If you were paid too much, you get to keep it. Paid too little and you get a credit. There were 2 possible payments made: the first one was made in mid 2020 and the second one was made in January 2021. You were sent notices 1444 for the first one and 1444-B for the second one. Hopefully, you can determine how much you received by checking these notices or your bank records. 

Gift Tax Returns

 Only individuals file gift tax returns using form 709 which are due at the same time as form 1040. The current maximum gift tax rate is 40% and is paid by the donor of the gift. Each person has an $11.7 million lifetime exclusion before any gift tax is owed. However the IRS wants you to report any gifts over $15,000 in a calendar year (taxable gifts) on form 709 even though no tax is due. What constitutes a taxable gift over the annual exclusion of $15,000? It can be cash, a below market sale, property, debt forgiveness, and a creation of a joint tenancy. A taxable gift does not include a direct payment of tuition and medical care for another person to the provider. There is also a generation skipping tax (GST) on all gifts to grandchildren or an unrelated person more than 37.5 years younger than the donor at the maximum 40% gift tax rate. This is in addition to the regular gift tax on the transfer. The GST rarely comes into play because everyone also has a lifetime $11.7 million GST exemption. 

2021 Standard Mileage Rates

 The rate for 2021 decreased to 56 cents per mile from 57.5 cents in 2020. This rate is used to calculate the tax deduction for using a car for your business. Medical care mileage is now 16 cents per mile and charitable mileage remains unchanged at 14 cents per mile. The IRS will disregard mileage estimates for your business upon audit. They are looking for a contemporaneous written record of business mileage. If you have significant business mileage, you should consider getting a mileage log at an office supply store to document your mileage. You can also document business mileage in your quickbooks. 

Estate Taxes

 The estate tax exclusion has increased to $11.7 million from $11.58 million in 2021. This amount is scheduled to drop back to $5 million adjusted for inflation on 1/1/2026. This is estimated to be between $6 million and $7 million. If you have an estate of $6 million or more, consideration should be given to making a portability election on form 706 to transfer a deceased spouse's unused exclusion to the surviving spouse prior to 2026. 

2020 Tax Organizers

 You should have already received the 2020 tax organizer from me either by regular mail or email. I send them to all my individual clients, but do not send out organizers to dependents, corporations, fiduciaries, or partnerships. Please let me know if you have not received your tax organizer yet. Thank you.

Meals Tax Deduction

 For 2021 and 2022, the law has been changed to allow for a 100% deduction of business meals. In 2020, you were only allowed a 50% tax deduction for business meals. This change was put in by the President to help the struggling restaurant industry.