FAQ

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Q. Should I change my withholding?

  

A.  In our experience there are four types of taxpayers

  1. The Owing Taxpayer – This taxpayer wants to owe at least $1,000 on their tax return because they can’t stand the thought of the federal government keeping one extra dollar of theirs during the year.
  2. The Break-even Taxpayer – This taxpayer would love if their refund and amount owed were both $0. The financial experts recommend you strive for this. However, tax laws and deductions are always changing and it’s easy to find yourself either owing $500 or getting a refund of $500. This taxpayer is comfortable with either outcome.
  3. The Buffer Taxpayer – This taxpayer says they “want to break even” but what they really mean is they want their bank account to at least break even, which means they really just don’t want to have to pay. They’re aware that their refund could be $0, or it could be $2,000. As long as the outcome is- they don’t have to write a check, they’re happy.
  4. The Big Refund Taxpayer – This taxpayer uses their tax refund as a quasi-savings account. They know they pay too much federal income tax withholding from their paychecks, but they use that large refund amount to take trips, buy necessary household appliances, vehicles, etc.

Which of these taxpayers is right? The answer is any of them. They each make decisions for themselves and accept the outcome. Which taxpayer are you? Is that where you want to be or if you could choose would you be in a different group? You can choose, and our tax professionals can help you!

Q. I got married last year, how do I file?

A.  Filing statuses are actually quite rigid, there is not nearly as much flexibility in which status to choose as many people would have you believe. If you are married by Dec 31st of the previous year, then you only have two options. Married Filing Joint or Married Filing Separate. I cannot begin to tell you the amount of times friends, families, attorneys or even divorce decrees give incorrect information in regard to filing statuses. If you are married, you absolutely cannot file two separate returns as Head of Household and Single respectively. You may file Married Filing Separate, but that comes with some potential downsides. Before making a decision on how to file, you should consult with a competent tax professional. 

Q.  I renovated my house last year, how much of it can I deduct?

 A.  This one depends on many factors, but generally the answer is $0. The maintenance, repairs, renovations and improvements on your primary residence are almost never deductible. That doesn’t mean they won’t help you in the long run, but you cannot write them off as an itemized deduction on your tax return. Instead, the amounts are used to increase your basis in your home. Basis is a running calculation to determine what you’ve paid for your home. In some cases, how much you’ve paid for your home, both the original purchase price and the improvements you’ve made to the home since you bought it, can be used to reduce capital gains tax on the sale of the home. Basis also matters for many other cases, such as the 2017 Hurricane Harvey Safe Harbor calculations.