New stan­dard de­duc­tions could make fil­ing taxes eas­ier

Arkansas Democrat-Gazette - - HOMES ARKANSAS -

Q. My hus­band and I have al­ways item­ized our fed­eral tax re­turn so that we could deduct the roughly $16,000 we pay each year in mort­gage in­ter­est and prop­erty taxes. Now that the stan­dard de­duc­tion for mar­ried cou­ples has been raised to $24,000, would it make sense to sim­ply claim it and skip the has­sle of item­iz­ing?

A. It would prob­a­bly make sense to claim the new, higher stan­dard de­duc­tion in­stead of item­iz­ing, un­less you have lots of other po­ten­tial tax write-offs.

The Tax Cuts and Jobs Act that Pres­i­dent Don­ald Trump signed into law a bit more than a year ago raised the stan­dard de­duc­tion for 2018 fed­eral in­come-tax re­turns to $24,000 for mar­ried cou­ples, $12,000 for sin­gle tax fil­ers and $18,000 for those who are el­i­gi­ble to claim headof-house­hold sta­tus. That’s up from $9,350, $6,350 and $12,700, re­spec­tively, from the stan­dard de­duc­tion that ap­plied for 2017 re­turns.

The IRS be­lieves that those higher lim­its will al­low up to 30 mil­lion more tax­pay­ers to sim­ply claim the stan­dard de­duc­tion in­stead of suf­fer­ing through the time­con­sum­ing task of scour­ing their 2018 spend­ing for pos­si­ble write-offs.

Still, there’s no cut-and-dried an­swer to your ques­tion.

For ex­am­ple, even if you choose to take the stan­dard de­duc­tion, you might still be able to take spe­cial write-offs if you or your spouse con­trib­uted to an in­di­vid­ual re­tire­ment ac­count or sim­i­lar plan, or if you paid up to $2,500 in stu­dent-loan in­ter­est for your­selves or a de­pen­dent.

Though sim­ply claim­ing the new, higher stan­dard de­duc­tion may be tempt­ing be­cause it would ease your fed­eral tax­fil­ing headaches, you and your hus­band would be wise to con­sult an ac­coun­tant or sim­i­lar tax pro­fes­sional to as­sess your sit­u­a­tion.

REAL ES­TATE TRIVIA An­a­lysts for Wall Street gi­ant Mor­gan Stan­ley ex­pect that the av­er­age tax re­fund this year (for 2018 re­turns) will be about 26 per­cent higher than the roughly $2,771 paid out last spring.

Q. I own my own home, and my girl­friend still lives with her par­ents. I plan to pop the ques­tion to my sweet­heart on Valen­tine’s Day. If she ac­cepts, would I need to put her name on the ti­tle to my house? Should I ask her to sign a prenup­tial agree­ment?

A. You aren’t legally re­quired to put your fi­ancee’s name on the ti­tle to your cur­rent home.

Do­ing so would au­to­mat­i­cally give her a half-in­ter­est in the prop­erty, but no le­gal re­spon­si­bil­ity to help make the monthly pay­ments un­less her name is also added to the bank’s orig­i­nal mort­gage con­tract or if you re­fi­nance the loan to­gether.

The two of you prob­a­bly don’t need a full-blown prenup­tial agree­ment (le­gal jar­gon for a con­tract that’s signed be­fore the wed­ding nup­tials are done). A “pre-nup” spells out how each of your re­spec­tive as­sets would be di­vided if the mar­riage ends in di­vorce.

Most lawyers say that a pre-nup is needed only for those who are mar­ry­ing some­one with far fewer as­sets or much more debt, or for peo­ple who are fi­nan­cially re­spon­si­ble for chil­dren from a pre­vi­ous re­la­tion­ship.

Folks who are in­volved in a fam­i­ly­owned busi­ness some­times sign a prenup­tial agree­ment to re­duce the chance of di­vorce jeop­ar­diz­ing an en­ter­prise that may have been in the bride or groom’s fam­ily for years.

Dis­cuss real es­tate and other fi­nan­cial con­cerns about your up­com­ing wed­ding with an at­tor­ney, as well as with your sweet­heart.

Q. My hus­band and I will cel­e­brate 22 years of mar­riage on Feb. 18. We are at that age when we need to think about how we want our home and other as­sets to be dis­trib­uted to our kids af­ter we pass away. How do we go about form­ing the type of liv­ing trust that you of­ten write about so our heirs won’t have to waste a bunch of time and money to get our es­tate through pro­bate court?

A. First, con­grat­u­la­tions on your up­com­ing an­niver­sary. I have been mar­ried 22 years my­self — though that’s an ag­gre­gate num­ber spent with two dif­fer­ent ex-wives.

You ob­vi­ously know that leav­ing your as­sets to heirs with the help of a liv­ing trust is usu­ally bet­ter than us­ing a con­ven­tional will be­cause a trust is a pri­vate doc­u­ment whose va­lid­ity doesn’t have to be con­firmed by the lengthy and costly pro­bate court process.

Some lawyers will cre­ate a trust for you for as lit­tle as $500 or $1,000, though oth­ers charge much more.

If you’re the do-it-your­self type, con­sider pur­chas­ing the book “Make Your Own Liv­ing Trust, 13th Edi­tion” (Nolo Press, www.nolo.com, 800-728-3555). It in­cludes all the de­tailed in­for­ma­tion you need to know about trusts and all the forms you may need to cre­ate one.

Two of the best on­line sources of in­for­ma­tion and forms needed to cre­ate a trust are the afore­men­tioned www.nolo. com, as well as www.legal­zoom.com. Both of­fer a va­ri­ety of good but rel­a­tively in­ex­pen­sive books, forms, soft­ware pro­grams and the like. You can even fill out their forms on your own com­puter, rather than hand-writ­ing them.

Happy 22nd an­niver­sary!

ABOUT LIV­ING TRUSTS David My­ers’ book­let “Straight Talk about Liv­ing Trusts” pro­vides the in­for­ma­tion read­ers need to de­ter­mine whether form­ing an in­ex­pen­sive trust would be a good idea based on their in­di­vid­ual cir­cum­stances. For a copy, send $4 and a self-ad­dressed, stamped en­ve­lope to D. My­ers/Trust, P.O. Box 4405, Cul­ver City, CA 90231-4405. Net pro­ceeds will be do­nated to the Amer­i­can Red Cross.

Send ques­tions to David My­ers, P.O. Box 4405, Cul­ver City, CA 90231-2960; and we’ll try to re­spond in a fu­ture col­umn.

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