Tax season is coming up quickly and this year has some big changes in store. While the new tax code is making it simpler for some taxpayers with less tax liabilities, it’s making it more tedious for people like business owners and renters to know what they qualify for.
“We’re spending a lot of time determining what the changes are ourselves,” Stan Mroz, a CPA in Palm Desert, said.
The White House Council of Economic Advisors projects 92 percent of all individual taxpayers are going to use a standard deduction. Why? It’s because itemized deductions are becoming severely limited. Things you used to be able to deduct, you can’t anymore.
Also, miscellaneous itemized deductions are gone, Mroz said. Miscellaneous itemized deduction include food, travel and other expenses.
Mroz believes the change to standard deductions is also do to its simplicity. For example, last year a “single” individual would have been entitled to $4,050 in personal exemptions and a $6,350 standard deduction, which is $10,400 total. This year, the deduction is one lump sum.
“If you’re single, that’s $12,000 or married, $24,000,” Mroz said.
No personal exemptions, just the standard deduction. For business owners or people with complex tax situations wondering if itemizing is still worth it, Mroz recommends professional guidance.
“There’s significant changes in business deductions,” he said.
“Special business deductions” are dependent on the type of business, taxable income, business net income and other factors. Under the new tax code, people who run a rental home are considered a business.
Sole proprietorships, LLC’s, and other types of businesses, could be eligible for certain deductions. Again, Mroz recommends taxpayers seek professional guidance because deductions you received in the past, might not exist anymore.