The tax deadline is almost here, and with the tax deadline comes a wide range of tax questions from filers. These questions range from those asked perennially (“can I claim my boyfriend as a dependent?”) to those specific to the events of 2017 like disaster relief and tax reform. To help make the tax filing process as easy as possible, TurboTax has answered the most commonly asked tax questions for this tax season.
Who can I claim as a dependent?
Your significant other is probably many things to you—but is he or she also a tax deduction? The question of who you can claim as a dependent has confused taxpayers for years.
The short answer: You can claim a “qualifying child” or “qualifying relative” if they meet specific requirements related to residence, relationship to you, age, financial support provided and income. And yes, you may be able to claim a girlfriend, boyfriend, domestic partner or friend as a qualifying relative in some cases. Claiming dependents can give you a tax deduction worth up to $4,050 per dependent and also make you eligible for many other tax deductions like the Earned Income Tax Credit.
What is the Earned Income Tax Credit and How Do I Claim it?
The Earned Income Tax Credit is a tax credit for low to middle income wage earners that has lifted millions of people out of poverty, however many people still miss it. Why do so many people miss it? Many think they don’t make enough to file their taxes so they don’t claim it. You have to file your taxes to get this valuable tax credit, which may help a family with three children who qualify receive a credit worth up to $6,318.
Does healthcare reform impact my 2017 taxes?
With tax reform enacted at the end of 2017 there have been questions around the requirements to have healthcare coverage. The Affordable Care Act changes under the new tax reform law do not happen until 2019. Individuals with income over the federal poverty level are still required to have healthcare coverage or they may be subject to a penalty. All of the exemptions (based on income, religious beliefs, and citizenship) are still in place.
Are unemployment benefits taxable?
Although unemployment income is taxable you may be happy to find your job search and moving expenses may be tax-deductible. See the next question for more details.
Can I deduct the cost of searching for a job? Are moving expenses for my new job tax deductible?
Job Seekers may be able to deduct many expenses related to their search: printing resumes, fees for employment and outplacement agencies, career seminar costs and business-related travel. Moving expenses relevant to your job search may be deductible if you meet the distance and time test.
What are the tax implications of withdrawing money early from a retirement account to pay bills or debt?
In difficult economic times, many people start eyeing their retirement accounts to pay off bills or debt. While it is your money, you may be unaware of the impacts of withdrawing from your nest egg. Withdrawing money early from a retirement account comes with a 10 percent tax penalty in addition to the regular income tax on the amount withdrawn. There can be other consequences, too. The retirement money may bump you into a higher tax bracket, which can result in the taxation of other income, such as social security, that you wouldn’t have been taxed on otherwise.
In addition, there are tax breaks for victims of natural disasters who have withdrawn from retirement accounts.
What are qualified education expenses? And when can I file?
College tuition skyrockets every year, but the U.S. government provides incentives with education credits and deductions. For example, the American Opportunity Tax Credit, benefits full-time and part-time college students in their first four years of college with a maximum $2,500 credit per student, provided you meet modified adjusted gross income requirements.
My house foreclosed, how does that impact my taxes?
The Mortgage Forgiveness Debt Relief Act was recently extended through 2017. This means you don’t have to pay taxes on the loss of your home through foreclosure or short sale, up to $2 million (or $1 million if married filing separately).
I started my own business; can I deduct my home office expenses?
Many entrepreneurs are reluctant to write off the business use of their home for fear of being audited. But home office expenses are legitimate tax deductions you shouldn’t miss out on. Keep in mind the space you claim as a home office should be used exclusively and regularly for that purpose.
Will the recent tax law changes impact my taxes?
On December 22, the President signed the tax reform bill into law, but it’s important to keep in mind that for most people, the bill does not affect their taxes for 2017 (the ones they file in 2018).
Because the majority of taxpayers are starting to see bigger paychecks due to 1% to 3% lower tax under the new tax reform law you should revisit your W-4 and adjust your personal withholding allowances. You should also revisit your W-4 due to changes to the 2018 tax law such as changes to itemized deductions, increased child tax credit to $2,000, the new dependent credit, and the eliminations of dependent and personal exemptions.
The newly passed Bipartisan Budget Act of 2018 also extended expired tax breaks through 2017 on February 9th.
I was impacted by a natural disaster in 2017. What tax breaks are available to me?
The Bipartisan Budget Act of 2018 that was passed on February 9, 2018 makes changes to the Disaster Tax Relief and Airport and Airway Extension Act of 2017, including extending the tax relief provided to cover disaster areas related to Hurricanes Harvey, Irma, and Maria that were declared between September 21 and October 17, 2017.
If were a victim of the California Wildfires there are special rules allowing access to retirement funds, temporary suspension of limits on deductions for charitable contributions, allowance of deductions for personal casualty disaster losses, and special rules for measurement of earned income to help you qualify for the Earned Income Tax Credit.
What if I still have questions?
Don’t worry about knowing these tax laws. TurboTax has you covered and will ask simple questions and give you the tax deductions and credits you’re eligible for. If you still have questions, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent and get your tax questions answered. A TurboTax Live CPA or Enrolled Agent can also review, sign, and file your tax return.