MARIELA RUIZ, CPA, PLLC

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Tag: tax deduction

How to Avoid a Tax Surprise with Your Remote Work Policy

March 6, 2024 / / 0 Comments

Working from home has been an emerging trend in recent years. It’s a policy that offers incredible flexibility and productivity as per the latest statistics. However, amidst the comfort of home offices, it’s crucial to stay vigilant about potential tax surprises that could lurk in the shadows. In this month’s blog, we’ll help you navigate the tax system and show you how to keep tax surprises as unwelcome guests.

Understanding Home Office Deduction Rules

You may have heard that taking the home office deduction sends a red flag to the IRS and raises your chances of being audited. So first, let’s see if you’re qualified or not for a tax deduction.

  1. If you’re an employer: Your home office must be used exclusively for work, and it should be your primary place of business. Keep meticulous records of your home office expenses, like utilities, internet, and maintenance, to maximize your deductions when tax season rolls around.
  2. If you’re an employee: You unfortunately don’t qualify for the home office tax deduction (some states do allow this tax deduction for employees). Before the TCJA, employees were allowed to deduct taxes, but, starting from the tax years 2018 through 2025, these deductions have been removed.
  3. If you’re self-employed: If you’re a self-employed taxpayer, you’re qualified for these write-offs. The IRS permits you to subtract 50% of your entire self-employment tax from your tax filing.

Track and Document Expenses Thoroughly

When it comes to taxes, documentation is your best friend. Whether it’s equipment purchases, software subscriptions, or office supplies, keep detailed records of your expenses. These records not only help you claim legitimate deductions but also serve as a robust defense in case of an audit.

Related: Learn more about when to consider a financial audit for your startup here.

Review Your Payroll Withholding

Remote work might affect your tax withholding, especially if your employer is located in a different state. Consult with your HR department to make sure your payroll withholding aligns with your current work situation. Adjustments may be necessary to avoid overpaying or underpaying taxes.

Consult a Tax Professional

When in doubt, seek professional advice. A tax professional can provide personalized guidance based on your unique situation, ensuring that you’re taking advantage of all available opportunities while avoiding potential pitfalls. The investment in their expertise can pay off in the long run.

Related: learn more about why it’s crucial to hire a tax expert here.

Conclusion

At MARIELA RUIZ, CPA, PLLC, we are here to help you stay informed and proactive, ensuring that your work-from-home experience remains financially smooth and rewarding. We will uncover industry-specific deductions for more tax breaks and file your taxes for you. Contact us today at (956) 997-0067 or visit our website mruiz-cpa.com to learn more about our services.

Expenses That You Didn’t Know Were Tax Deductions!

July 22, 2022 / / 0 Comments
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Tax deductible expenses are basically work or company expenses in which the government allows tax relief. During tax season, it is much better to come prepared and have all your books and records straight for a successful financial audit. You can claim tax deductions on expenses that are exclusively made in the interest of the business as per HMRC. The following is a list of tax deductibles that you can claim this tax season.

1. Expenses of Your Business

If you have invested a significant amount of capital on the expenses of a startup or your business, you can claim it all as a tax deductible by showing it as a business expense. All the hardware and supplies like computers and office stationery necessary to set up your business, the cost of business registration as a licensed product, the web domain fees, and advertising are all under the umbrella of tax deductibles. Any expenses that are paid for using personal funds can be claimed when the company or legal entity starts trading, so be sure to keep receipts and maintain accurate records.

2. Office Maintenance

For any repairs and maintenance work for your office, the amount is tax deductible. If you are working from an office, you can also file your rent for the premises as a tax deductible as well. This also includes small business owners who work in a home office. In this case, you would have to report what percentage of your home is used for your business and measure your work space.

3. Electricity, Water, and Gas Bills

Due to the spread of COVID-19, people were assigned to work from home. If you also work from home, you can easily claim a certain percentage of your electricity, water, and gas bills as tax deductibles. Determine how much of your home is used for professional work purposes. The said amount will be registered as a tax deductible amount from all your expenditure. This includes power bills, council tax, and even some part of the interest on your mortgage payment.

4. Subscriptions

If you are paying for subscriptions strictly for professional purposes, it can also be stated as a tax deductible. For example, a production company will have access to multiple editing and animation software products.

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Conclusion

Claiming tax deductibles is a technical aspect and should be left to seasoned professionals to take care of it. Are you looking for a public accountant to take care of your financial affairs? Let a professional do it for you. MARIELA RUIZ, CPA, PLLC offers professional accounting, bookkeeping, and tax preparation services at affordable rates in Mission, TX. Visit our website to learn more about our services or simply give us a call at (956) 997-0067 for further assistance.  

A Homeowner’s Guide to Tax Deductions

July 21, 2021 / / 0 Comments

Being a homeowner means you can potentially benefit from multiple tax breaks if itemizing deductions on your tax return makes financial sense. However, itemizing your deductions are only beneficial if it exceeds the IRS standard deduction. To decide whether or not it’s worth it, start by adding up all the deductions you qualify for and compare it to the standard. No one wants to pass up an opportunity to save on taxes, so read on to learn more about tax deductions that may apply to you.

Property Tax

A property tax deductible is one of the benefits of being a homeowner. You can deduct up to $10,000 or $5,000 if you’re married filing separately. You might also be able to deduct property and real estate taxes on vacation homes, land, vehicles, etc. The IRS does not allow deductibles on property you don’t own and property taxes you haven’t paid yet. If you rent a home, you also cannot write off any property taxes.

Mortgage Interest Rates

A mortgage interest deductible allows you to reduce your taxes by how much interest you’ve paid during the year. Most homeowners are able to deduct all of their interest expenses. However, it’s important to seek the advice with a financial advisor because there are certain limits. According to NerdWallet, “the deduction is limited to interest on up to $750,000 of debt”. If it exceeds this amount, then you may not qualify for a tax deduction.

Rental Income Deductions

If you’re paying a mortgage with renters living on the property, then you qualify for a rental income deduction. The money you receive for rent can be considered taxable in the same year your receive it. Repairs, such as painting, fixing utilities, and other maintenance, is a deductible expense. However, improvements that add value to the property, such as a completely new roof or patio, are not deductible.

Home Office Expenses

You can only deduct home office expenses if you are self-employed and are working out of your home. These expenses can be divided into two categories: direct and indirect. Direct expenses apply only to the area designated as your home office and is used only for business. Maintenance and repairs applied to only that area can be considered as fully deductible expenses. On the other hand, indirect expenses involve the maintenance of your entire home. These expenses are only deductible to a certain percentage based on the square footage of your office.

Home Medical Equipment

If you have healthcare or medical equipment installed in your home for you, your spouse, or a dependent, then you can get this deducted. This also includes home improvement costs for installing ramps, rails, an escalator system, widening doorways, and so on. Be sure to keep the documents of your medical equipment including those that confirm it was approved or recommended by a medical specialist.

Solar Power

Did you know adding solar power panels to your roof can be added to your tax deduction? Not only is it better for the environment but it will also benefit as tax credit. Beginning in 2021, homeowners can take 22% of the cost of installing solar systems. However, this benefit will be lost by 2023, while commercial and utility users can only claim 10%. Homeowners should take advantage of this benefit while they can.

Conclusion

Overall, there are many potential tax breaks that you may benefit from. Always be sure to keep your documents of proof organized and safe. If you need help compiling your deductibles or are in need of financial advice, rely on MARIELA RUIZ, CPA, PLLC. We are here to make the process easy and stress-free. Learn more about our services by visiting our website or calling us at (956) 997-0067.

Tax Deductions for Working at Home

April 12, 2021 / / 0 Comments

The global pandemic of 2020 pushed many businesses to allow their employees to work from home. Many companies look for postponements, cancellations, potentially staff illness, and lockdowns during these difficult times. Many people are looking for tax deductions for working at home. However, getting the tax break is not as simple as it may seem. Here’s some information to consider before trying to get a tax deduction for working at home.

Self-Employed Taxpayers and Independent Contractors

            According to Barbara Weltman, the owner of Big Ideas for Small Business, she states, “If you’re an employee filing taxes between 2018 and 2025, you cannot claim the deduction.” The 2017 Tax Cuts and Jobs Act says that an employee cannot include unreimbursed business expenses if they worked from home at their employee’s convenience. However, the Internal Revenue Service (IRS) claims that self-employed taxpayers and independent contractors are entitled to the deduction. Additionally, individuals earning money in a gig economy can potentially claim the credit, such as a person who is an employee and a gig worker on the side. Many states such as Arkansas, California, Hawaii, Minnesota, New York, and Pennsylvania will let employees take deductions on home office expenses.

Eligible Individuals

            As explained by the IRS, individuals who are exclusively and regularly using their home as a place of business can receive the tax deduction. Unfortunately, a spare bedroom or detached garage used only a few times throughout the year may not fit in exclusive and regular quota. It is important to understand that an audit’s stresses do not compare to the benefits of a deduction. The best thing to do is take a picture of the workspace to present evidence to the IRS.

Two Types of Deduction

            There are two types of tax deductions that an individual may receive depending upon a few elements. Firstly, there is a simplified method that offers a deduction of $1,500 to taxpayers. It requires filling out a Schedule C document, which asks the total square footage of a home and the space being used as a business inside the house.  The IRS will conduct an equation of $5 per square foot, making a home office space of 300 square feet have a tax break. Schedule C’s benefit is that a tax filer does not have to keep evidence of home office expenses.

The other tax deduction can be a tremendous tax saver for people who have been working from home for a long time. IRS Form 8829 is where you show your math in claiming the deduction by adding business expenses like rent, utilities, renters’ insurance, and improvements to space. Some self-employed taxpayers may be losing money by choosing the simplified method.

Conclusion

            Receiving a tax deduction is always a great way to save money. However, there are some specific requirements that people working from home need to meet. Also, taxpayers who are patient can find themselves with more money in their pockets. For more useful information, you can contact MARIELA RUIZ, CPA, PLLC. We specialize in all helping individuals and businesses financially thrive. For many years we have offered various services, including forensic accounting, tax services, financial consulting, bookkeeping, and much more. Our many years of experience ensure that you’re in good hands. Visit our website to contact us today!

What is Solar Power Tax Credit?

March 24, 2021 / / 0 Comments

Green energy sources have many benefits to you and the world, including a federal tax credit or home and business owners who have had solar power panels installed before December 31. The federal solar tax credit, known as the investment tax credit (ITC), is much more profitable than a deduction. However, for taxpayers to get the full benefit, the world needs a sufficient income. Here are what tax professionals should know about ITC.

Introduction

When the government provides a tax incentive, it is happy about it, especially when local and state enticements convoy it. According to the Environmental Protection Agency, the government passed the ITC as part of the Energy Policy Act, which has been extended four times since its initial passage. The credit is now at 26 percent for the next two years so that eligible taxpayers can have a dollar-for-dollar decrease in the amount of income tax they owe. Taxpayers are looking forward to 2023 because the tax credit will drop to 22 percent. Renewable portfolio standards are in some states where utility companies give clients a specified minimum amount of electricity from solar. Utility companies buy energy made by a solar customer’s house. The value of solar renewable energy certificates will vary by state, but this is an example of taxpayer liberation.

How Does It Work?

            Solar power panels remain to provide people with prospective savings after filing their taxes. Solar energy creates opportunities to resell excess energy, evade power outages when harmonizing with a battery, and charge electric cars. The sun’s rays shine on the solar panels resulting in generating electricity that gives homeowners lower electric bills. The energy is completely free to the owner once the payment to the solar company ends. Also, solar power works all day, even when it is raining or dark overcast. Utility companies can offer the ability to sell back electricity to the grid for a credit on a homeowner’s electric bill. The utility companies can credit a home’s electric account.

The government is devoted to solar power that many states and cities have recognized property tax exemptions on solar. The solar panel installation calculates property tax fees giving homeowners and companies more money.

Conclusion

Solar energy panels have many benefits for businesses and homeowners. However, it could be challenging to understand everything about the tax deduction that comes with installation. You can count on Mariela Ruiz, CPA, PLLC, to help you with your taxes. We can give you tax advice for any situation you are in and find a financial solution that benefits you. We want to save you money by providing attentive and well-strategized plans, so call us at (956) 997-0067 today!

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