We’re nearly halfway through 2018, which is a perfect time to review a few of the key updates that the IRS has made. We know that staying on top of the IRS’s continually evolving guidelines can be challenging, so here are the most important items that you should know:
Changes to Home Equity Loan Interest Deductions
The Tax Cuts and Jobs Act went into effect this year, which means that there are significant changes to deductions. That also means that there’s a considerable amount of confusion about what’s still deductible and what isn’t, especially around home equity loans. While the new tax reform added restrictions to how mortgages are deducted, in most cases you can still deduct the interest on your home equity loan, your home equity line of credit, and/or your second mortgage, regardless of how those loans are labeled.
The major exception to this rule is if you took out a loan this year and used the loan proceeds for anything other than buying or improving your home, such as paying down credit card debt. For loans taken out before the Tax Cuts and Jobs Act, it’s a little more complicated. We recommend speaking with us if you would like to learn more.
Interest Rates are on the Rise
For the second quarter of 2018, interest rates have increased. The new rates are 5% for individual overpayments, 4% for corporations up to $10,000, and 2.5% for overpayments over $10,000. For underpayments, the rate is 5% for individuals and 7% for corporations.
Email Phishing is a Top Tax Scam
Email phishing fraud, where scammers target taxpayers and tax professionals by using fake IRS emails and websites, was ranked as one of the most prevalent and detrimental tax schemes on the annual “Dirty Dozen” list of tax scams for 2018. Fraudsters have used fake electronic correspondence, including social media and text messages to try to steal sensitive personal and financial information.
The IRS never initiates contact or requests information through email, so if you receive unsolicited communication from what appears to be the IRS or another tax related organization, contact your tax accountant right away and report it to firstname.lastname@example.org.
Cray Kaiser can help you navigate each change the IRS makes as they apply to your unique situation. If you have questions about these updates or any other tax related concerns, please don’t hesitate to contact us.