Tax Preparation Help: 5 Tax Deduction Myths
Tax Preparation Help: 5 Tax Deduction Myths
By Ronn Espy
There are a wealth of tax deduction myths, rumors and plain old wives tales during every tax season. Many opt not to get professional tax preparation help and file their own taxes based on misinformation, only to regret it later when the IRS comes calling. It is sobering of find out they filed using mythical deductions and write offs. Here are 5 big ones to look out for:
#1 – My Medical Expenses Are Tax Deductible.
If they exceed 7.5% of your adjusted gross income (AGI)Medical expenses may be tax deductible. However there is a catch, which is that you can ONLY deduct the amount of out of pocket expenses that are greater than the 7.5% threshold. A lot of medical expenses will be necessary to make this work.
Be advised: If medical expenses are reimbursable, they are not deductible even if you did not get reimbursed.
#2 – I must use money from my home sale to buy another residence.
In the old days that was partially true but in 1997, home-sale tax law changed. If the home you sold was your principal residence for at least 2 out of the last 5 years, then you can exclude from tax up to $250,000 in gain (and $500,000 on a joint tax return). Consult a tax professional.
#3 – My mortgage interest will reduce my tax bill
Usually this one is true but not in all cases. To claim a tax deduction for your home loan’s interest, you must itemize and come up with a total that exceeds your standard amount. Those at the end of a mortgage loan term are paying more principal than interest thus don’t get much, if any break in taxes because the interest paid is so little.
#4 – I Have to File a Joint Return Now that I’m Married
This is false. You always have the option of filing “Married Filing Separately.” Just be cognizant that this choice will normally result in you paying more in taxes. But this can be to you and your spouses advantage.
An example, if one spouse has considerable medical or miscellaneous deductions, those items might never be used (with a combined income) as a deduction if they do not meet the 7.5% and 2% minimum requirements respectively. Review your individual cases and see if filing separately might allow you to then take advantage of those tax deductions. Ask a tax preparation professional. Incidentally, you can change your filing status annually.
#5 – My Diet Program Is Tax Deductible
If certain requirements are met a weight loss program may qualify as a tax deductible medical expense.
1) Your physician must have prescribed it! 2) It is intended to treat a particular disease. Obesity IS considered a disease, so it might count if you are legitimately obese. If you’re not obese but need to lose weight to lower your blood pressure, that might make the program a tax deductible expense. Word of caution: the overall cost still has to meet the 7.5% requirement as indicated above.
Seeking qualified tax preparation help is a wise decision when it involves filing your taxes and the eligible tax deductions you will qualify for. Tax return preparers, CPA’s or Tax Attorneys are available online or off to advise you on tax deductions. Use their tax preparation help to seperate fact from fiction.
We hope you found this article about “Tax Preparation Help: 5 Tax Deduction Myths” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or our website at www.GROCO.com. Unfortunately, we no longer give advice to other tax professionals gratis.
To receive our free newsletter, contact us here.
Subscribe our YouTube Channel for more updates.
Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.
Alan L. Olsen, CPA, Wikipedia Bio
GROCO.com is a proud sponsor of The American Dreams Show.
The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.
Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.
The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.
They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..
American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:
Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…
MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness. It’s mission statement:
In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.
Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.
Tom Wheelwright sits down with Alan Olsen, Host of the American Dreams show to discuss tax free wealth. Transcript: Alan Olsen Welcome to America Dreams. My guest today is Tom wheelwright CPA, Tom, welcome to today’s show. Tom Wheelwright Thanks, Alan. It’s really always good to be with you. Alan Olsen I am really excited…
Determining The Best & Worst States for Wealthy Retirees Can be Subjective Retirement marks a significant phase in life, offering a new world of opportunities and choices. One critical decision for affluent retirees is selecting the right state to enjoy their golden years. In this post, we’ll explore the 5 best and worst states for…
Chris Maxson, owner of Acucraft Fireplace Systems and Managing Partner, Maxson family’s business ventures discusses igniting innovation in the fireplace industry with Alan Olsen. Below are some of the key aspects of Chris Maxson’s influence on the fireplace industry and his unique approach with Acucraft Fireplace Systems. They indicate the rich legacy and innovation themes discussed.…