Month: September 2023

It’s back to school season, which is also a good time to remind teachers, principals, and other educators about the educator expense deduction which they may be eligible for. If you are an educator, you may be able to deduct up to $300 of out-of-pocket classroom expenses for 2023 when you file your federal income tax return next year.

This is the same limit that applied in 2022, the first year this provision became subject to inflation adjustment. Before that, the limit was $250. The limit will rise in $50 increments in future years based on inflation adjustments.

This means that you may be able to deduct up to $300 of qualifying expenses paid during the year. If you’re married and file a joint return with another eligible educator, the limit rises to $600. But in this situation, not more than $300 for each spouse.

Who qualifies?

If you’re an eligible educator, you can claim this deduction even if you take the standard deduction. Eligible educators include anyone who is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide who worked in a school for at least 900 hours during the school year. Both public and private school educators qualify.

What’s deductible?

Educators can deduct the unreimbursed cost of:

• Books, supplies and other materials used in the classroom.
• Equipment, including computer equipment, software and services.
• COVID-19 protective items to stop the spread of the disease in the classroom. This includes face masks, disinfectant for use against COVID-19, hand soap, hand sanitizer, disposable gloves, tape, paint or chalk to guide social distancing, physical barriers, such as clear plexiglass, air purifiers and other items recommended by the Centers for Disease Control and Prevention.
• Professional development courses related to the curriculum they teach or the students they teach.

Qualified expenses don’t include the cost of home schooling or for nonathletic supplies for courses in health or physical education. As with all deductions and credits, be sure to keep good records, including receipts, cancelled checks and other documentation.

Separation and divorce are never easy for the couples involved. In addition to all the personal issues at play, separation and divorce can impact the former couple’s tax situation as well.

Am I married for tax purposes?

The IRS considers a couple married for tax filing purposes until they get a final decree of divorce or separate maintenance.

Update tax withholding

When a person divorces or separates, they usually need to update their tax withholding by filing a new Form W-4, Employee’s Withholding Certificate, with their employer. If they receive alimony, they may have to make estimated tax payments.

Tax treatment of alimony and separate maintenance

• Amounts paid to a spouse or a former spouse under a divorce decree, a separate maintenance decree or a written separation agreement may be alimony or separate maintenance for federal tax purposes.
• Certain alimony or separate maintenance payments are deductible by the payer spouse, and the recipient spouse must include it in income.

Rules related to dependent children and support

Generally, the parent with custody of a child can claim that child on their tax return. If parents split custody fifty-fifty and aren’t filing a joint return, they’ll have to decide which parent claims the child. If the parents can’t agree, the IRS provides tie-breaker rules that can be used to resolve the dispute. Child support payments aren’t deductible by the payer and aren’t taxable to the payee.

Not all payments under a divorce or separation instrument—including a divorce decree, a separate maintenance decree or a written separation agreement—are alimony or separate maintenance. Alimony and separate maintenance does not include:

• Child support
• Noncash property settlements, whether in a lump-sum or installments
• Payments that are your spouse’s part of community property income
• Payments to keep up the payer’s property
• Use of the payer’s property
• Voluntary payments

Child support is never deductible and isn’t considered income. Additionally, if a divorce or separation instrument provides for alimony and child support and the payer spouse pays less than the total required, the payments apply to child support first. Only the remaining amount is considered alimony.

Report property transfers, if needed

Usually, if a taxpayer transfers property to their spouse or former spouse because of a divorce, there’s no recognized gain or loss on the transfer. People may have to report the transaction on a gift tax return.

The summer is prime time for buying or selling a house. If you purchased a home this year, here are a few tax deductions and programs that you might be eligible for.

Deductible house-related expenses

Most people take out a mortgage to buy their home and then make monthly payments to the lender. This mortgage payment may include several costs of owning a home that can be deducted, such as:

• state and local real estate taxes, subject to the $10,000 limit.
• home mortgage interest, within limits.

It’s important to note that in order to take advantage of these deductions, you must itemize your deductions (rather than simply taking the standard deduction).

Non-deductible payments and expenses

Unfortunately, not all expenses related to owning a home are deductible. For example, you cannot deduct any of the following:

• Insurance, including fire and comprehensive coverage and title insurance
• Down payments on a mortgage
• Wages paid to housekeepers and other domestic help
• Depreciation
• The cost of utilities, such as gas, electricity or water
• Most settlement or closing costs
• Forfeited deposits, down payments or earnest money
• Internet or Wi-Fi system or service
• Homeowners’ association fees, condominium association fees or common charges
• Home repairs

Mortgage interest credit

The mortgage interest credit helps people with lower income afford home ownership. If you qualify for the mortgage interest credit, you can claim the credit each year for part of the the interest paid on your home mortgage. You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate from your state or local government. An MCC is issued only for a new mortgage for the purchase of a main home.

Homeowners Assistance Fund

The Homeowners Assistance Fund program provides financial assistance to eligible homeowners for paying some expenses related to their principal residence. The goal of the fund is to prevent mortgage delinquencies, defaults, foreclosures, utility shut-offs, and the displacement of homeowners experiencing financial hardship after January 21, 2020.

Minister’s or military housing allowance

If you are a minister or member of the uniformed services and receive a nontaxable housing allowance, you can still deduct your real estate taxes and home mortgage interest. You don’t have to reduce your deductions based on the allowance.

If you have questions about these programs and tax deductions, or if you are wondering if you qualify for any of them, please contact our office. We would be happy to help.