Income Tax Return For Single And Joint Filers With No Dependents Answers: Fill & Download for Free

You really have to look past that one change—the $10,000 limit on the deductability of state and local taxes (“SALT”).In the past, one of the “sacred cows” has been the ability of homeowners to deduct interest on their home mortgages. Doing so reduces a homeowner’s tax burden, and therefore acts as a sort of tax subsidy to encourage home ownership. Even though this deduction “costs” billions of dollars each year, Congress has been reluctant to make any significant changes to it. You might think of it as a sort of political “third rail.”Until now.The Tax Cut and Jobs Act, cobbled together behind closed doors over a very short time and without any input from the minority party, has changed the way deductions for mortgage interest, property tax and state income taxes can reduce a taxpayer’s overall income tax liability.First, you should understand how income taxes work.* You report a certain amount of income from various sources: wages, self-employment, dividends, capital gains, etc. You adjust this income by means of deductions and exemptions.First, there is the personal exemption (what we used to call “dependents”). For 2018, it was $4,150 for the taxpayer and any dependents appearing on the tax return. A married couple with no children would claim $8,300. If they had one child, they’d claim $12,450. This number reduced the gross income for tax purposes.Then, the taxpayer subtracts deductions. If you can list your deductions (“itemize”), you’d put them on Schedule A of your tax return. Some of the items you would routinely claim would be charitable donations, mortgage interest, property taxes paid on your residence and state income taxes. If the total you are able to claim exceed the Standard Deduction, you’d use that higher figure. If they do not, you’d simply take the Standard Deduction because your tax liability would be lower. For 2018, the Standard Deduction would have been $6,500 for a single filer or $13,000 for a married couple filing jointly.The tax benefits from itemizing deductions appear to the extent that the total of those deductions exceeds the Standard Deduction. A married couple filing jointly, earning $75,000 could claim $13,000 in addition to the $8,300 personal exemption. Their taxable income would have been $49,550. Their federal income tax would have been $6,480.If the couple had bought a $300,000 home with a mortgage, they might claim about $17,000 in mortgage interest and property tax. The total would be more than the $13,000 standard, so they’d be able to lower their taxable income a bit more by itemizing. Their tax liability would drop to $5,842, a reduction of $638 for that year.The foregoing is a long-winded way of illustrating that the tax benefits of home ownership are based on the amount that itemized deductions exceed the available Standard Deduction.In most years, 30% of the 135 million people filing returns itemized their deductions.There were several changes implemented with the Tax Cut and Jobs Act. One was the removal of the Personal Exemption. The second was the increase in the Standard Deduction. It was nearly doubled, to $12,000 from $6,500 for single taxpayers, and to $24,000 from $13,000 for married filing jointly. The overall effect of this change is that fewer taxpayers will benefit from itemizing their deductions, since they will not exceed the increased Standard Deduction.The tax bill also limits the amount of property taxes and state income taxes a person can claim on their tax return. Before, there was no limit to either; now, it is capped at $10,000. To put this into perspective, someone buying an $600,000 home in an expensive area like much of California, Connecticut or New York would pay about $7,500 annually in property taxes. Adding state income taxes could easily surpass the new $10,000 cap.I should also mention that there are two new limitations on the deductability of mortgage interest. Previously, a couple filing jointly could deduct interest on up to $1 million of “acquisition indebtedness,” a loan used to purchase the property, plus interest on up to $100,000 of “equity indebtedness,” loans such home equity lines. Now, the cap for a married couple filing jointly is $750,000. Interest on equity financing is no longer deductable, regardless of when it was placed on the property. For single taxpayers, the numbers are half.Your original question was quite a bit simpler than my answer might indicate. You asked, “How big a deal are the new limits on state and local tax deductions for most people in the USA?” The simple answer is that it doesn’t affect very many, since only 30% of tax returns filed contain itemized deductions. Now, fewer taxpayers will itemized their deductions, now that the Standard Deduction is larger. While people may believe they are making out like bandits with the larger deduction, they are typically unaware that the loss of the Personal Exemption negates much of the touted benefit of the new tax law. For anyone really interested in reading about the differences in excruciating detail, I refer them to an earlier answer of mine, Joe Parsons' answer to Are the Democrats trying to ruin the tax-cuts Trump just made?.I hope this is helpful.* This explanation is purposely simplified for this illustration. The principles are accurate

The answer to this question is “It depends.”The qualification to contribute to a Roth doesn’t have so much to do with Ashley’s tax filing status as it does her income.First, she must have earned income in order to contribute to any IRA. Salary, wages, etc. Assuming Ashley has earned income in 2020, the maximum amount she can contribute across all IRAs she owns is $6,000 (or $7,000 if she is age 50 or better.) These limits will be the same for 2021.Second, if Ashley’s Adjusted Gross Income exceeds certain thresholds, her ability to contribute to a Roth is limited. This is where her tax filing status is important, because the thresholds are different for Single and Joint filers.As a joint filer, if Ashley’s AGI is at least $196,000, this is the point at which the ability to contribute to a Roth begins to “phase out”. Her Roth contribution will phase out completely at $206,000 of joint AGI. At that point, she might want to look at a back door Roth conversion. However, even that can carry some unintended negative tax consequences due to the pro rata rule.

Yes. The mortgage interest deduction changed in two direct ways and one indirect way.Before the Tax Cuts and Jobs Act went into effect, a married couple filing jointly could deduct interest on up to $1 million of acquisition indebtedness. This is loans incurred at the time of purchase. A single filer was allowed to claim interest on $500,000.The amount was reduced to $750,000 and $375,000 for married taxpayers and single filers, respectively. Taxpayers with balances higher than this are “grandfathered.”Previously, a homeowner was allowed to deduct interest on up to $100,000 equity indebtedness (HELOC or equity loan), regardless of their filing status. With the new tax law, interest on HELOCs are generally not deductible at all, unless the proceeds are used to “substantially improve” the property.The tax benefits of home ownership comes from the homeowner’s ability to deduct mortgage interest and property taxes—but only to the extent that the total of their itemized deductions exceed the available standard deduction. For married couples filing jointly, the standard deduction was slated to be $13,000 ($6,500 for single taxpayers). If the total of all the taxpayer’s itemized deductions did not exceed their available standard deduction, there would be no point in itemizing, hence no tax benefit for them. Tax returns with itemized deductions have typically amounted to about 30% of all returns filed.The new tax law increased the standard deduction to $24,000 for married couples filing jointly ($12,000 for single filers). In order for a homeowner to derive any benefit from itemizing their deductions, they’d have to buy a home of around $425,000. Below that figure, they would be unlikely to exceed the available standard deduction.Raising the standard deduction has eliminated the tax advantages of home ownership for most people. Although the near-doubling of this figure may appear beneficial to some, it is also important to know that the personal exemption has been eliminated. A childless married couple would have been able to claim $4,150 each, even if they did not itemize their deductions. After the increased standard deduction, but with no more personal exemption (they used to be called “dependents”), their taxable income will be just $2,700 lower than under the old tax code.I wrote about the tax law in considerable detail and with examples in Joe Parsons's answer to Are the Democrats trying to ruin the tax-cuts Trump just made?