Tax Newsletter

• Limits on Tax Deductibility for Charitable Contributions
  If you made a tax-deductible contribution to a qualified charitable organization, the actual amount you can deduct may be limited to a percentage of your adjusted gross income. The amount that you are entitled to deduct depends on... Read more.
• Taxability and Deductibility of Rental Income
  The Internal Revenue Service (IRS) defines rental income to include any payment received as a result of the use or occupancy of property. Vacation homes, condominiums, mobile homes, boats, and even portions of property may be a source... Read more.
• Effect of Marital Status on Federal Tax Filing Status
  For federal income tax purposes, there are five tax “statuses:” single; head of household; married filing jointly; married filing separately; and qualifying widow(er) with dependent child. Status affects tax credits and... Read more.
• When the IRS Assesses Tax Liability Against Only One Spouse
  There are several forms of joint ownership of property, some of which provide that upon the death of one owner, the property automatically passes to the joint owner(s) (i.e., by right of survivorship). These types of joint ownership may... Read more.

• Trump Tax Law Hurts Personal Injury Suit Settlements
• Tax law changes: Planning for liability
• Estate Planning Under the New Tax Law
• IRS wins closely watched tax case against Intel
• New tax law creates challenges for farmers, tax experts

Separate Tax Returns and Itemized Deductions

When filing your federal tax return, you usually have the option of taking the standard deduction or itemizing your deductions to adjust your taxable income. However, if you are married but filing separate tax returns and choose to itemize deductions, then your spouse will not qualify for the standard deduction. In order to claim allowable deductions, your spouse should also itemize his/her deductions.

If you file a separate return, you may be able to claim the following deductions regardless of whether you paid expenses separately or jointly.

Medical Expenses

If you paid for medical expenses with funds deposited in a joint checking account, you can deduct half of the total medical expenses on your separate return, unless you can show that you alone paid the expenses.

State Income Tax Returns

If you filed your state return separately, you can deduct the amount you paid for yourself

If you filed a state return jointly and are jointly and individually liable for the full amount, you can deduct the amount you paid for yourself

If you filed a state return jointly and are only liable for your own share of state income tax, you can deduct the smaller of:

• The state income tax you paid during the year
• The amount that is proportionate to your gross income compared to the combined gross income of you and your spouse

Property Tax

If you paid taxes on property owned jointly by you and your spouse in a “tenancy by the entirety” ownership, you can deduct the amount of property tax that you alone paid. (A tenancy by the entirety is a form a joint ownership of real estate, only applicable in some states).

Mortgage Interest

In community property states, you and your spouse may each take an equal deduction of one-half the mortgage interest you paid. In other states, you may be able to split the deduction any way you want. In that case, it may make more sense to give more of the deduction to the higher-earning spouse to reduce his or her adjusted gross income (the amount on which taxes are paid).

Casualty Loss

If you have a casualty loss on a home you own as tenants by the entirety, you can deduct half of the loss, but neither spouse may report the total casualty loss.

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