All posts by Nick Deblois

Is the Tax Cuts and Jobs Act Supporting the Decision to Have More Children?

Last winter Congress passed the Tax Cuts and Jobs Act (TCJA) in an effort to lower income taxes for virtually all taxpayers. As a result, most Americans are expecting larger refunds this spring. Supporters of the bill believe this will help improve the economy, while others believe it is fiscally irresponsible. Whatever your belief is, it is certainly changing the way tax returns are prepared and enhancing certain credits.

One of the major changes with the Tax Cuts and Jobs Act, is that the deduction for personal exemptions has been suspended. This is often a significant benefit for taxpayers and families with children. The new tax code however, is increasing the child tax credit up to $2,000 per child under Code Section 24(h)(2). Under pre-Act law, the child tax credit provided taxpayers a benefit up to $1,000 per child. The pre-Act law also phased out taxpayers by $50 for each $1,000 of adjusted gross income (AGI) over $75,000 for single filers, $110,000 for married filing joint filers, and $55,000 for married individuals filing separately. These phase out thresholds often kept many taxpayers from receiving this credit. Thankfully, under the new Tax Cuts and Jobs Act, the phase out thresholds have increased to $400,000 for married taxpayers filing jointly, and $200,000 for all other taxpayers. These child tax credit modifications will certainly benefit more taxpayers with qualifying children.

Another benefit of the Tax Cuts and Jobs Act, to help combat the suspension of personal exemptions, is the non-child dependent credit. Under Code Section 24(h)(4) there will be a partial credit worth up to $500 for each dependent of the taxpayer, that is other than a qualifying child. This will likely help taxpayers who have been providing qualifying relatives more than half of their annual support.

These are two small changes included in the Tax Cuts and Jobs Act that could have the potential to reduce your 2018 taxes. The TCJA will certainly impact every taxpayer’s 2018 tax return in one way or another.

If you would like to review what implications the TCJA could have on your 2018 tax return, PFBF CPAs is happy to assist you with your questions. Please don’t hesitate to stop by one of our offices: 259 Front Street, Bath or 46 First Park Drive Oakland.

Nick Deblois is a Staff Accountant at Perry, Fitts, Boulette & Fitton CPAs. He works closely with other senior staff members of the firm, honing his talents regarding tax and accounting matters. He can be reached at  207-873-1603.

How Can Life or Career Changes Affect Your Tax Return?

Have you recently changed jobs? Started your own business? Maybe welcomed a child to your family? Well, all of these situations could have tax consequences or benefits, requiring some financial planning.

When changing jobs, there are several things to consider. Did you have a 401(k), 403(b) or another form of retirement plan at your old job? If so, rolling over your retirement plan to your new employer or to an individual retirement account, may provide you with more control over your retirement savings. Also, if you recently relocated for a new job, you may be eligible to deduct moving expenses. In order to qualify, the following three requirements have to be met: your move is closely related to the start date of your new employment, your new job is at least 50 miles from your prior home, and you must have worked full-time, for at least 39 weeks during the first 12 months, in the new area where your job is located. If your job relocation satisfies these requirements, you are entitled to deduct reasonable and qualifying moving expenses. Along with considering these additional items and benefits when changing jobs, make sure you receive your W-2 from your previous employer.

Have you recently started a new business or hobby and are trying to figure out how to report the income on your tax return? The first step is to consider whether the activity is in fact a business or a hobby. The key way to differentiate between a hobby and a small business hinges on your profit motive, or lack thereof. If you have a profit motive, and spend a considerable amount of time participating in your new venture, you are likely operating a small business. Unincorporated small businesses generally report income and expense on a Schedule C of form 1040. If your new adventure is really a hobby, income is reported on line 21 “Other income”. Expenses are deductible only if you itemize deductions, and are subject the 2% limitation. In either case, it is important to keep detailed records of your income and expenses.

Finally, and most exciting to me is how a new child can affect your tax situation. If you added a child to your family at any time during the year you qualify for an additional dependency exemption, which phase out for higher income families, for 2017 are $4,050. The addition to the family may also allow you to become eligible for the child tax credit, and credit for child and dependent care expenses. These credits have income limitations, but are helpful when trying to combat the expenses of a new child.

There is a lot to consider during life and career changes, but our experienced accountants at Perry, Fitts, Boulette & Fitton CPAs are happy to assist you through these tax and financial changes. We want you to be well prepared for the 2017 tax filing season. If we can further assist, please don’t be afraid to stop in at either our Oakland or Bath offices.

Nick Deblois is a Staff Accountant at Perry, Fitts, Boulette & Fitton CPAs. He works closely with other senior staff members of the firm, honing his talents regarding tax and accounting matters. He can be reached at nick@pfbf.com or 207-873-1603.