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Video instructions and help with filling out and completing When Form 5495 Deductions

Instructions and Help about When Form 5495 Deductions

Hi I'm Ben Anders with innovative solutions CPAs and advisors there's been a lot of uncertainty and anxiety in the US since the passage of the tax cuts and Jobs Act in late 2022 this is the first in a series of short videos designed to help clear up some of that confusion my topic for today will be the changes in the standard and itemized deductions as you may know many years ago with the intention of not taxing people on the money that they need just for daily necessities in daily living Congress created something called itemized deductions this is a list of expenses that you can deduct before calculating taxable income if these itemized deductions don't add up to enough taxpayers can deduct a specified flat amount called the standard deduction on their 2022 tax returns many people will itemize their deductions if their total of mortgage interest property tax state and local income taxes charitable donations and a few other items add up to more than their standard deduction amount for 2022 the standard deduction amount for individuals is six thousand three hundred and fifty dollars and for married couples it's twelve thousand seven hundred dollars beginning for 2022 the tax cuts and Job Act increases the standard deduction for people filing single to twelve thousand dollars and for married couples to twenty four thousand dollars some people will still itemize their deductions in 2022 but many people will switch to taking the standard deduction this is because the limits on many common deductible items have been decreased here are some of the more important changes the deduction for state and local taxes including state and local income taxes property taxes and vehicle license fees has been capped at ten thousand dollars total this is going to be a big change especially for people in high-income tax states like California or high property tax states like New Jersey for 2022 home mortgage interest used to acquire your first or second home will still be deductible but now only the interest on seven hundred and fifty thousand dollars of debt will be deductible instead of the interest on a million dollars in debt as it is in 2022 also if you've been deducting interest on your home equity line of credit that is going to be completely gone in 2022 there is one limit that the tax cuts and job act actually increases and that is the limit on charitable contributions this limit has been raised from fifty percent of your adjusted gross income to sixty percent of your adjusted gross income if you give fifty or sixty percent of your income to charity that is awesome and you can consider yourself lucky but for most people this will have no effect at all in the past itemized deductions have included a catch-all type category called miscellaneous itemized deductions in excess of the two percent AGI floor it's a bit of a complicated name but these were things like unreimbursed employee expenses union dues safety deposit box fees tax preparation fees investment advisor fees and so on unfortunately these are going to be completely eliminated beginning in 2022 what's not being eliminated are gambling losses these may still be deducted up to the extent of your winnings so gamblers you hit the jackpot on that one there are a few other itemized deductions that have been altered or removed these include the deduction for dental and medical expenses and casualty and theft losses I'm not going to go into a lot of detail about them here because you generally don't have those on your tax return every year if you itemize your deductions these can be found on the schedule a of your tax return which is generally the third page in your tax return so take a look at your itemized deductions for 2022 or 17 if you were single and your itemized deductions added up to some or in the range of 6,000 to 12,000 dollars you're probably going to take the $12,000 standard deduction in 2022 if you were married and your itemized deductions added up to somewhere between 12,000 and 24,000 dollars you're probably going to take the $24,000 standard deduction in 2022 if your 2022 or 17 itemized deductions were above $12,000 for single taxpayers or $24,000 for married filing jointly taxpayers then some figuring is gonna need to be done in 2022 to see whether you will still itemize or whether you'll take the standard deduction in the past there's been an overall limit on the maximum amount of itemized you could deductions you could take and this depended on your income level the tax cuts and Jobs Act completely removes that overall limit but this may be a moot point as many of the deductions previously allowed are now reduced or eliminated obviously this is a complex area I hope this has cleared up some confusion for you if you have more specific questions I really recommend that you give your CPA a call right away thank you so much for listening and have a great day.

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