Hot Tips for The New Tax Year Part 9

Childcare Credit of 20% to 35% of your childcare expenses is available for working parents
who pay childcare for their children under the age of 13. The amount of eligible expenses is $3,000
for one child and $6,000 for two or more children. To be able to claim this credit, you must know
the total amount paid to each childcare provider, the provider’s legal name and Social Security
Number or Employer Identification Number, the provider’s address and phone number.

Office In Home Expenses will be allowed for the place of business which is used by the
taxpayer for the administration or management activities of the taxpayer’s business if there is no other
fixed location of the business where these activities are substantially performed. The home office
must still be used regularly and exclusively, but no longer needs to be the place where the incomeproducing activities take place. You may use either the standard method or simplified option.

Substantiating Your Expenses. The TCJA eliminated the deduction for any expenses
related to activities generally considered entertainment, amusement or recreation. Taxpayers may
continue to deduct 50% of the cost of business meals if the taxpayer (or employee of the taxpayer) is
present and the food or beverages are not considered lavish or extravagant. Proper substantiation of
your expenses is still required. You should substantiate each of the following four elements of your
expense:

1) Time & Place
2) Business Purpose
3) Dollar Amount
4) Business Relationship

In addition to recording this information you will need receipts, tickets or other supporting
documentation for expenditures of $75.00 or more (other than lodging).

A Qualifying Child of More Than One Person. If a child meets the rules to be a
qualifying child of more than one person, only one person can treat that child as a qualifying child
and claim the EIC using the child. You and the other person can decide who will claim the credit
using that qualifying child. Ask your preparer at Tax & Accounting Plus for details.

Gift Exclusion. The annual exclusion for gifts made to a donee during 2019 is $15,000.

Day Care Providers. Family day care providers can choose to use a standardized rate to claim
a deduction for meals. The rates are Breakfast – $1.33, Lunch/Dinner – $2.49 and Snack – $.74. The
standard rate is allowed for up to 1 breakfast, 1 lunch, 1 dinner & 3 snacks per day per child,
provided the meals & snacks are actually purchased & served.

Retirement Savings Contributions Credit. You may be able to take a credit of up to
$1,000 ($2,000 MFJ) for qualified retirement savings contributions. The credit is phased out if your
AGI is more than $32,000 ($48,000 – Head of Household, $64,000 – MFJ). This includes
contributions to traditional or Roth IRAs, 401(k) plans, 403(b) plans, 457 plans, SIMPLE plans, and
others. Contributions are reduced by any distributions from the above plans received by the
taxpayer(s) from January 1, 2017 through the due date (including extensions) of your 2019 return.

Divorced or Separated Parents. A noncustodial parent claiming an exemption for a child
can no longer attach pages from a divorce decree or separation agreement instead of Form 8332 if the
decree or agreement went into effect after 2008.

Social Security & Medicare Taxes. The maximum wages subject to social security tax is
$132,900 for 2019 and $137,700 for 2020. All wages are subject to Medicare Tax.

Additional 0.9% Medicare Tax. In 2019, wages and self-employment income are subject to
a 0.9% additional Medicare Tax to the extent they exceed $250,000 (MFJ), $200,000 (Single, HOH,
QW) and $125,000 (MFS).

3.8% Net Investment Income (NII) Tax. In 2019, individuals are subject to a NII tax
equal to 3.8% of the lesser of their NII or the excess (if any) of modified AGI over the threshold
amounts of $250,000 (MFJ, QW), $200,000 (Single, HOH) and $125,000 (MFS).

Same-Sex Marriages. In its 2013 decision in the Windsor case, the Supreme Court held that a
key provision of the Defense of Marriage Act is unconstitutional. In response to this decision,
effective September 16, 2013, individuals in a same-sex marriage will be treated as married for all
federal tax purposes, including income, gift and estate taxes. This applies to all federal tax
provisions where marriage is a factor, including filing status, claiming personal and dependency
exemptions, taking the standard deduction, tax-free employee benefits, contributing to an IRA and
claiming the earned income tax credit or child tax credit. Individuals in registered domestic
partnerships, civil unions or similar formal relationships recognized under state law are not
considered married for federal tax purposes.

Charitable Giving. You must have a dated receipt from the charity and a canceled check or
credit card statement to prove their deduction. Also, for non-cash donations such as clothing and
household items, make sure you make an inventory list of everything you are giving and attach it to
the receipt received from the charity. A picture of the donated items will also help support your
deduction.

Premium Tax Credit. Individuals with low to moderate income who get health coverage
through the Health Insurance Marketplace (also called the Exchange) may be eligible for this
refundable credit. Your household income must be at least 100%, but no more than 400% of the
federal poverty line for your family size. Some individuals may have chosen to have all or some of
the estimated credit paid in advance directly to the insurance company. Advance payments paid
during the year are subtracted from the amount of the Premium Tax Credit. If the advance payments
exceed the credit, the difference (up to certain limits) is an additional amount of tax due.

Nanny Tax. Compensation paid for domestic service in an employer’s home is not subject to
FICA until the cash wages paid are $2,100 or more.

Per Diem Allowance. The per diem allowance for meals and entertainment within the United
States for 2019: Standard Rate – $55 Transportation Workers – $66 Incidentals – $5
Generally, a taxpayer may only deduct 50% of business-related meal expenses. An exception is for
the transportation industry where the taxpayer may deduct 80%. This can include individuals
working on an airline, barge, bus, ship, train, or truck. Per Diem allowances for specific cities may
benefit you. See your tax preparer for details.

Teachers. Elementary and secondary school teachers are allowed a $250 deduction for classroom
expenses. Eligible educators include kindergarten through grade 12 teachers, instructors, counselors,
principals, or aides in a school for at least 900 hours during a school year. Qualified expenses include
books, supplies, equipment (including computer equipment and software), and other materials used
in the classroom. No deduction is allowed if the expenses are reimbursed by the employer and not
included in box 1, W-2.

Check back each week for more tax tips from Tax & Accounting Plus