Source, IRS:    Tax Reform Tax Tip 2019-102

Summer is a season when people have fun, yet get things done. From buying a new house to cleaning their old one, taxpayers who itemize their deductions may be doing things this summer that will affect the tax returns they file 2019 taxes.

The higher standard deduction under the new tax law means fewer taxpayers are itemizing their deductions. However, taxpayers who still plan to itemize next year should keep the following tips in mind:

1. Deducting state and local income, sales and property taxes

The deduction that taxpayers can claim for state and local income, sales and property taxes is limited. These deductions are limited to a combined, total deduction of $10,000 and it is $5,000 if married filing separately. Any state and local taxes paid above this amount can’t be deducted.

2. Refinancing a home. The deduction for mortgage interest is also limited

 It is limited to interest paid on a loan secured by the taxpayer’s primary residence or second home. For homeowners who choose to refinance, they must use the loan to buy, build, or substantially improve their main home or second home, and the mortgage interest they may deduct is subject to the limits described in item 3 below; “buying a home.”

3. Buying a home. 

Taxpayers who buy a new home this year can only deduct mortgage interest they pay on a total of $750,000 in qualifying debt for a first and second home. It is $375,000 if married filing separately. For existing mortgages, if the loan originated on or before December 15, 2017, taxpayers continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes.

4. Donating items and deducting money. 

Many taxpayers do a good summer clean-out in summer. They often find unused items in good condition they can donate to a qualified charitable organization. These donations may qualify for a tax deduction. Taxpayers must itemize deductions to deduct and must have proof of all donations. Taxpayers can use the Interactive Tax Assistant to help determine whether they can deduct their charitable donation.

5. Deducting mileage for charity

Driving a personal car while donating services on a trip sponsored by a charity could qualify for a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2019.

6. Reporting gambling winnings and claiming gambling losses

Taxpayers who itemize can deduct gambling losses up to the amount of gambling winnings. They can use the Interactive Tax Assistant to find out more about reporting gambling winnings and  losses next year.

 

Zaher Fallahi, CPA, Tax Attorney, advises taxpayers including Americans Living Abroad, in resolving their tax problems and undisclosed foreign bank accounts; FBAR, FATCA and Offshore Voluntary Disclosure Program (OVDP).  Telephones: (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), Toll Free Nationwide 877-687-7558  e-mail taxattorney@zfcpa.com