Standard Deductions, Medical Expenses, SALT Limitation, Mortgage Interest, And Charitable Contributions
These are all Schedule A Deduction Issues. There’s a lot to discuss today, so let’s get into it…
Increase in Standard Deduction
The Standard Deductions for 2024 are as follows…
Filing Status Standard Deduction
MFJ $29,200
HOH 21,900
Unmarried and not surviving spouse 14,600
All other individual taxpayers 14,600
Additional standard deductions are provided for individuals over age 65 and for individuals who are legally blind.
In order to itemize on Schedule A. generally your deductions should be higher than these limits.
Medical Expense Deduction
In 2024, taxpayers can claim an itemized deduction for unreimbursed medical expenses that exceed 7.5% of their Adjusted Gross Income. In order for medical expenses to be considered deductible, they must be prescribed by a physician.
So if you have an adjusted gross income of $100K this year, the first $7,500 of medical expenses you have are non-deductible. In order for you to get a deduction of $1, you would need $7,501 in deductible medical expenses.
As discussed in prior columns, the Self Employed Health Insurance Deduction is a work-around where we can provide a full deduction for your company sponsored health insurance expenses. If you have questions, please let us know.
State and Local Taxes (SALT)
Taxpayer may claim an itemized deduction on Schedule A up to $10,000 ($5,000 for MFS) of the total amount paid for:
1 – State and Local Property taxes not paid in carrying on a trade or business: and
2 – State, Local, and Foreign Income taxes.
As mentioned before, there are now ways for us to bypass the SALT Limitation for the taxes paid on Pass Through Entity Income. Again, if you have questions, please let us know.
Home Mortgage Interest Deduction
This is now limited to the first $750K of acquisition debt ($375K MFS). Acquisition debt incurred prior to 12/15/17 retains its status of being deductible on $1M of acquisition debt and $500K MFS.
Charitable Contributions of Cash
Individuals may deduct cash contributions up to 100% (Previously 50%) of their contribution base for charitable contributions to recognized charitable organizations. The contribution limit is 60% of your adjusted Gross Income.
Let me Leave you with this…
The number of sales of existing homes are on track to have their worst year since 1995. This is the second year in a row that this figure is almost setting records.
Existing home sales in September fell 1% from its year earlier figure. That was the lowest rate for a month that we’ve seen since October of 2010.
High home prices and interest rates on 30 year fixed mortgages that are still near 7% are pushing most buyers away. Inventory is still being limited because owners are still sitting on 2% or 3% mortgages that they put into place before the pandemic.
Home prices have continued to rise as inventory is being restricted around most areas of the nation. When you add in the most recent commission changes where Buyers Agents are no longer guaranteed a commission, it all adds up to one thing.
Most realtors are having a really tough year.
The other part of the equation that’s difficult is that many younger buyers can’t afford their first home. When you look at the increased interest rates, property taxes that are skyrocketing, and insurance rates that have no end in sight, it all adds up to one thing.
Many younger buyers will remain renters.
If you take this to its logical conclusion, you begin to wonder how these Americans will be able to save for their retirement. Home ownership has long been the main way the Middle Class funds their elder years.
This simply means that saving for your retirement is more important than ever.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
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