New standard deductions could make filing taxes easier
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.