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Refunds are up from last year: Tax Strategy Scan

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Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

Tax refunds are up from last year
Clients who have yet to file their tax returns have last-minute options to maximize the amount they will receive as a refund from the IRS, according to this article on CNBC. One smart move is to make the most of tax credits available to them, as many of these tax breaks are refundable. They can also boost their tax refund by changing their filing status and maxing out deductible contributions to their IRAs and HSAs.

Making the most of an HSA once you turn age 65
Seniors will face a 20% penalty on top of income taxes if they withdraw funds from an HSA for non-medical expenses before the age of 65, according to this Kiplinger article. The penalty disappears once seniors take the non-medical withdrawals after that age, but the distributions will still be subject to income tax. Moreover, “you can use HSA money tax-free for several extra expenses, such as paying your monthly premiums for Medicare Part B and Part D and Medicare Advantage plans,” according to an expert.

When clients can deduct medical expenses in 2018
Taxpayers can claim a medical expense tax deduction on their 2018 returns only for the portion of the aggregate cost that exceeds 7.5% of their adjusted gross income, according to this article on Fox Business. For the 2019 tax year, the threshold increased to 10% of the AGI. Taxpayers will need to itemize their tax deductions on their returns to claim the break for their medical expenses.

Tips for claiming 20% rental deduction
Not all property investors can claim the 20% qualified business income tax deduction for their rental income, according to this article on Crain’s Cleveland Business. Based on the guidance released by the IRS, investors should have separate books and records to reflect the earnings and expenses from their rental properties and must have spent at least 250 hours within a year to provide rental services to claim this deduction. Investors should also keep contemporaneous records showing the hours, nature and dates of services performed as part of their rental property activities.

What some clients tried to claim on their tax returns shows they often don't know much about accounting.
February 5

4 tax breaks seniors don’t want to miss
Seniors who want to maximize their savings at tax time should take advantage of the bigger standard deduction under the new law, according to this article on Motley Fool. These clients should also make the most of the higher tax filing threshold and catch-up contributions to save more on taxes. The tax credit for the elderly or disabled is a tax break that also proves valuable for older people.

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