Is Deducting Expenses The Same As Claiming Other Deductions On Taxes?

[legomom922]

Every yr I go through the same thing..I save all kinds of reciepts and stuff(not DC as this is my 1st yr) and in the end I find out the standard deduction is always more for us, and then thats what we use, and then I think about all of my wasted time...I think the standard deduction for married people was something like $11,000 or some crazy number like that. Even buying a house didnt help us because the interest rate is so low!

NOW, with all of the DC expenses, does this work the same way? Am I still going to find out after all of this time & energy, that I probably will still come out better with the standard deduction and therefore all of this will be a waste? Or is it the type of thing where it will act more of like a credit or something? I remember last yr we had new windows put in, and we were able to lower our tax because of the energy/home improvement tax credit we got.

So I am just wondering if all my efforts will be wasted...Could someone explain?

[kendallina]

You can take the standard deduction AND can deduct your daycare expenses, it's not just one or the other.

[Abigail]

I just realized today that it's not one or the other. LOL. I seriously thought it was over the years and I did take a tax class and must have missed that chapter! Every year I donate and don't keep receipts because I figured I would never reached the standard deduction amount. This year I donated (today, valued over $200!) and will keep my receipt and pictures and excel page that added it up for me and keep all our future receipts from monetary donations so we can deduct it all. I sure how we can do both (standard, plus specific items donated) because I'm all excited for next year.

[kendallina]

I just realized today that it's not one or the other. LOL. I seriously thought it was over the years and I did take a tax class and must have missed that chapter! Every year I donate and don't keep receipts because I figured I would never reached the standard deduction amount. This year I donated (today, valued over $200!) and will keep my receipt and pictures and excel page that added it up for me and keep all our future receipts from monetary donations so we can deduct it all. I sure how we can do both (standard, plus specific items donated) because I'm all excited for next year.

I just looked up the charitable donations thing because I have some I'd be able to claim this year and I realized that you can deduct on your federal taxes only if you itemize, but I think you can deduct it on your state taxes...do you know if that's right?

[TomCopeland]

Standard Deduction

If you were better off in previous years taking the standard deduction before you started doing child care, this will be even more true now that you are in business. When claiming property tax and mortgage interest you must divide these expenses between Form 8829 (time-space % amount) and Schedule A (the personal portion of these expenses). Since you will deduct less mortgage interest and property tax on Schedule A it will be more unlikely you will have enough expenses to itemize.

You can't deduct charitable deductions on your federal tax return unless you itemize on Schedule A.

[legomom922]

If you were better off in previous years taking the standard deduction before you started doing child care, this will be even more true now that you are in business. When claiming property tax and mortgage interest you must divide these expenses between Form 8829 (time-space % amount) and Schedule A (the personal portion of these expenses). Since you will deduct less mortgage interest and property tax on Schedule A it will be more unlikely you will have enough expenses to itemize.

You can't deduct charitable deductions on your federal tax return unless you itemize on Schedule A.

I am a real dummy when it comes to taxes Tom, so please forgive me, so are you saying being in business will NOT help me at all anyway if I take the standard dedcution? There is NO WAY I would ever have more than $11,000 in deductions........ Should I stop wasting my time and just forget trying to go through all these reciepts and folders then?

[Crystal]

legomom....your Business income AND expenses are claimed on Schedule C. You will also file form 8829 and 4562, for some business expenses. None of these forms are forms you would use for just personal taxes, they are for your business. AFTER you have calculated your income and subtracted your expenses from it on schedule C, you will then put your net income onto form 1040. Your business taxes will be figure on schedule SE ( I think) and you will then deduct one-half of that on your 1040. Your taxes should not be income taxes, they are self-employment taxes and are 15.3% of your income AFTER expenses.
You will still claim your standard deduction on 1040 AND your business expenses on schedule C.

KEEP YOUR RECIEPTS AND CLAIM YOUR EXPENSES OR YOU WILL OWE!!!!

[TomCopeland]

Standard Deduction

It is a good idea to keep all receipts of expenses to see if you qualify for itemizing. You can compare each year to see if itemizing or taking the standard deduction. Now, if you've been doing this for awhile and don't think you'll ever have enough deductions to itemize then maybe you don't want to continue saving these receipts.

I'm talking about your personal receipts for itemizing, not your business receipts.

[Abigail]

For personal taxes, does a couple really donate $11,000 a year for charity??!! Is that the only way you would want to itemize is if you donated more than the standard allowance? I was under the wrong impression that I could add to my standard deduction because the receipts for donating money say it's tax deductible. So, what kind of things would a person have to do to actually be better off itemizing instead of standard since they don't mix? Thanks, I'm doing my taxes later this week.

[legomom922]

You will still claim your standard deduction on 1040 AND your business expenses on schedule C.

Ok, well this is what I was wondering, since I have never done this before. So if I understand correctly, I claim my 11,400 standard deduction as usual, AND my business expenses but on another form.

My concern was that since I ususally always always have to claim the standard deduction, I would see NO benefit from claiming my business expenses. Just like when everyone kept telling me when I bought my house how it would help me with taxes, but it didn't...It provided no benefit to me tax wise anway.

In the past, lets say DH made $50,000, and I made $0, and we claimed the standard deduction, we would get back appx $4000.
Now this yr, DH makes $50,000 and I make $5000, and claim my buisness expenses along with teh standard deduction, should I still expect to get back the same amount? Or will it be appx more??

[Jewels]

But you can claim a loss, So say your income is $5000, and you have $5500 in daycare expenses, then your income would be a loss of $-500, which is even more of a benefit, I'm not quite sure what happens to the loss, if its subtracted then from your husbands income, or carried over, I don't know, But either way it means a little more money in your pocket. Not sure if I'm on the right track of your question above. I got confused

[legomom922]

But you can claim a loss, So say your income is $5000, and you have $5500 in daycare expenses, then your income would be a loss of $-500, which is even more of a benefit, I'm not quite sure what happens to the loss, if its subtracted then from your husbands income, or carried over, I don't know, But either way it means a little more money in your pocket. Not sure if I'm on the right track of your question above. I got confused

Well that wont happen..I only have about $1500 expenses as it is..

I just don't want to waste sooo much time on this tax stuff, and not get anything back from it..

What were you confused about?

[kendallina]

Ok, well this is what I was wondering, since I have never done this before. So if I understand correctly, I claim my 11,400 standard deduction as usual, AND my business expenses but on another form.

My concern was that since I ususally always always have to claim the standard deduction, I would see NO benefit from claiming my business expenses. Just like when everyone kept telling me when I bought my house how it would help me with taxes, but it didn't...It provided no benefit to me tax wise anway.

In the past, lets say DH made $50,000, and I made $0, and we claimed the standard deduction, we would get back appx $4000.
Now this yr, DH makes $50,000 and I make $5000, and claim my buisness expenses along with teh standard deduction, should I still expect to get back the same amount? Or will it be appx more??

Whatever expenses you had in 2010 will be deducted from the $5000. The remainder of that amount will be taxed, meaning you will have to pay tax on it. From my understanding (this is my first year too) it will be taxed around 20-25%...someone feel free to correct me if I'm wrong.

[legomom922]

Even when claiming the standard deduction?

How do some make a profit then?

[TomCopeland]

Standard deduction

Lots of confusion on this issue.
Abigail - When you itemize you can count all of your charitable contributions, medical expenses, personal portion of property tax and mortgage interest, and more. It's the total of these expenses that determine whether or not you are better off using the standard deduction or itemize. If you take the standard deduction you cannot deduct charitable contributions. You are better off taking the standard deduction only if the total amount of your itemized deductions are less.

Legomom - If you use the standard deduction you will get an additional tax benefit from your business by being able to claim the business portion (t/s%) of your property tax and mortgage interest on Form 8829. This is a tax benefit from owning your home. Now, even if you itemize you can still claim these same house expenses on your business tax form (Form 8829). In addition, no matter whether you itemize or not, you can always claim house depreciation as a business expense. I can't answer your specific question because I don't have all the facts. But I can say that when you make more money you pay more taxes. Therefore, you may get less money back after filing your taxes but you may also have more money in your pocket because you made more money.

Jewels - If you do show a loss you cannot have your house expenses increase a loss. Therefore, you would roll over your house expenses from one year to the next. If you show a profit the next year you can deduct these carry over house expenses to reduce your profit.

Legomom - It's still worthwhile to keep records of your house expenses because they may be deductible in a later year if you have a loss this year.

Kendallina - Yes, your federal taxes could be in the 20-15% range, depending on all your family circumstances.

Legomom - Claiming the standard deduction has nothing to do with limiting your profit from your business. Your business expenses always include the business portion of your property tax and mortgage interest. If you use the standard deduction you don't directly claim any of the personal portion of these two expenses because they are deemed to be included in the standard deduction amount. If you use the itemized method then you get to deduct the personal portion of these two expenses. You determine which method to use based on your family's expenses. Either way, your business gets the same deductions for your home.