Real Questions from our Reddit Ask Me Anything – Deductions
Editor’s Note: In mid-January, we hosted a Reddit Ask Me Anything (AMA) with Andy, a director in The Tax Institute at H&R Block. Reddit is a community-based website with over a million topic forums and AMAs are places for people to ask anything to an expert on a topic. Andy answered some of the Internet’s most burning tax questions, ranging from tax reform to student loans, marriage, freelance work, and more. This is the third post in a four-part series. Check out the bottom of this post for links to our other Reddit AMA posts.
Have a question about deductions? How does the changes to the standard deduction impact you? Have you recently paid off your student loans? Check out a few of Andy’s answers about deductions.
Q: How can I determine the value of the mortgage interest deduction?
A: That one is tough to answer in a vacuum. It depends upon many factors, like are you itemizing your deductions, how much income you have, what’s your filing status. To answer this one accurately, you really need to prepare your return to see the result.
Changes on Deductions from Last Year
Q: Should I file EZ or Itemized?
A: New year, new forms. Tax changes have gotten rid of the 1040EZ to make things ‘EZier’ for taxpayers with one version of Form 1040.
If your itemized deductions are more than the standard deduction, then it makes sense to itemize. But remember, the standard deduction has nearly doubled, so think twice before defaulting to itemizing.
Q: If you could point out the most significant change to tax laws for this year, what would it be?
A: Tax law changes have been on everyone’s mind lately. The tax changes impacting most of us are standard deductions and child tax credits.
Standard deductions have nearly doubled and if you’ve got kids- they’re now little bundles of tax credit joy, as child tax credits have also increased in amount and become available to higher income taxpayers.
LLC and Businesses
Q: I have an LLC on which I declare very minimal losses every year (rent, phone bill, restaurant meals, etc.) Should I keep the LLC alive or just do this work under my own name
A: You’ll most likely be taxed the same way, even if you get rid of your LLC, because you’ll still be a passthrough entity. However, you may want to review non-tax considerations, like the legal protection provided by an LLC, before making any changes.
Q: Can I itemize use of my hot tub as a percentage of my rent. Isn’t it a business expense if I do work there as well as my home office?
A: Nice try. No.
Q: I made less than 12k last year and they already take all of my refunds for student loans. What’s my incentive to file?
A: Even if you do not owe or may not be getting money back, the IRS still requires you to file if you meet the filing requirements. If you want to stay compliant, you’ve got to file every year that it’s required. Plus, remember that each time they keep your refund, that money is reducing your outstanding student loan balance.
Q: Is the interest on student loan 1098 I’m going to deduct equal to the exact amount of money I should get? Why or why not?
A: Because student loan interest is claimed as a deduction, you will only receive a tax benefit equal to a percentage of the amount you deduct. For example, if you are in the 10% tax bracket and deduct $2,000 worth of interest, your potential tax refund will only be increased by $200 by the deduction.
Q: I paid off a private student loan this past year. Can I deduct that from my taxes this year?
A: Congratulations! If I paid off my student loan, I’d throw a college-style party I wouldn’t remember the next day.
But, what I would be sure to remember is that the interest paid last year may be tax deductible (up to $2,500), but the principal unfortunately is not.
If you love Halloween, did you know that there can be candy-related sales tax by state? Watch out for your Halloween spending with these facts from H&R Block.
The gig economy and taxes go hand-in-hand. If gig work is your primary form of income, review these important tax tips from our H&R Block tax professionals.
The role of godparents is very important in the Latino community. Learn more about godparent responsibilities at H&R Block.
Why is budgeting important? How much do you need in savings? How much to spend on housing? It's all covered in this guide to creating a financial budget.