Looking for the Largest Deduction

IRS allows taxpayers the option to take the standard deduction or the itemized deduction.  The astute taxpayer will compare to see which one will result in the greatest deduction and the election can be made each year.

The 2013 standard deduction for a married couple filing jointly is $12,200 and $6,100 for a single taxpayer.  It doesn’t require any proof of actual expense and has no requirement for home ownership.

Items that can be included on Schedule A for itemized deductions include:

• Certain taxes paid for state and local income tax, general sales tax, real estate property taxes, personal property taxes or other taxes paid
• Qualified home mortgage interest, investment interest or possibly, mortgage insurance premiums
• Charitable contributions
• Casualty or theft losses
• Medical and dental expenses that exceed 7.5% of adjusted gross income if born before 1/2/49 or 10% if born after 1/2/49
• Job expenses and other miscellaneous deductions that exceed 2% of adjusted gross income

A non-homeowner taxpayer who has been taking the standard deduction needs to consider that it isn’t just the ability to deduct the mortgage interest and property taxes.

While the standard deduction might be the obvious choice for a non-homeowner, the combination of the mortgage interest and the property taxes plus other allowable deductions not recognized previously such as charitable contributions, now makes taking the itemized deductions significantly more advantageous.

Of course, this is only general information and should not be considered advice. The best way to make any tax decisions is to talk with your tax professional. If you would like a recommendation for a CPA, please let me know. I would be happy to refer you.

Sales Tax Holiday Weekend; So What's a Tax Stamp?

Everyone knows this weekend is the Massachusetts sales tax holiday! Who doesn’t love a tax

holiday? We hear a lot of news about federal income tax, state income tax, property taxes, capital gains tax, tax loop-holes, proposals for new taxes on everything from gasoline to computer services…taxes are always being talked about.

The tax we never hear about is called a “tax stamp”. A what? It’s the tax the state of Massachusetts collects when you sell a house. When I talk with people who are planning to sell their home about what their selling expenses will be, they are almost always surprised (and not in a good way) to hear they have to pay the state when they sell.

How much is it? $4.56 per thousand and unlike federal gain taxes that are only on the “gain” and there are standard exemptions (check with you accountant), tax stamps are paid on the total sale price whether you have a gain or not.

Example: You sell your house $550,000. The tax would be 550 x $4.56 = $3,058.00. This is the amount that will show up on the as a deduction on the sellers side of HUD settlement statement and paid at closing (before you get the proceeds.)

So that's what a "tax stamp" is! Enjoy the sales tax holiday even if you're planning to sell!
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Marilyn Messenger has been selling residential real estate  in the Wayland/Sudbury area for 20 years. Visit www.MarilynMessenger.com or call 508-596-3501 for answers to your home selling and/or buying. questions.