Multiple life events and complicated income

[Jamiefalcone]

Hi there! I've had a number of life changes this year, two of which would have an impact on my taxes. 1) I started a new job in June where I get paid base salary, commission, vehicle reimbursement and some other bonuses. This makes it very complicated and I don't quite know where to start. While our vehicle reimbursement program is typically tax-deductible, mine will be taxed because my car is aged out of compliance by 1 year. What exactly does that mean for me and how do all of these sources of income get reported on my taxes? I also have a home office now and am unsure of how to write off those expenses, or if I even can. 2) I recently bought a house (with my fiance) in Washington state and would love to better understand how this purchase would affect both of our taxes, either together or independently. We will still be unmarried at the time taxes are due.

Thanks!

[xmasbaby0]

Sounds like you have a W-2 job.   

W-2 employees cannot deduct job-related expenses on a federal return.  Job-related expenses were eliminated as a federal deduction for W-2 employees by the tax laws that changed for 2018 and beyond.  Your state tax laws might be different in AL, AR, CA, HI, MN, NY or PA.  If you are a W-2 employee you cannot enter anything about a home office.

Your wages will be on your W-2.   Ask your employer to explain to you how they will enter the car allowance.

Washington has no state income tax, so no worries regarding WA.

As for home ownership, if you and your fiance are both homeowners you can each file your own return and enter the amount you paid for mortgage insurance and property tax in 2022 on your own tax returns.    You cannot file a joint tax return if you are not legally married.

The home ownership might not even make a difference.

HOMEOWNERSHIP DEDUCTIONS

It is very hard for a lot of people to use itemized deductions now that the standard deduction is so much higher.  Your home ownership may not have any effect on your tax due or refund, especially if you purchased the house late in the year.  

Standard Deduction
Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach.  The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes. 

2022 STANDARD DEDUCTION AMOUNTS

SINGLE $12,950  (65 or older + $1750)

MARRIED FILING SEPARATELY $12,950  (65 or older + $1750)

MARRIED FILING JOINTLY $25,900  (65 or older + $1400 per spouse)

HEAD OF HOUSEHOLD  $19,400  (65 or older +$1750)

Legally Blind + $1750

Home Ownership

There is not a first time home buyers credit on a Federal return. That ended in 2010. If your state has such as credit, you will be able to enter it when you prepare your state return.

Buying a home is not a guarantee of a big refund.  Your deductions for homeownership combined with your other deductions (if any) must exceed your standard deduction to change your tax due or refund. If you purchased your home late in the year, you do not even have a full year of home 

ownership deductions.

Your closing costs on your new home are not deductible except for prepaid interest, prepaid property tax or loan origination fees.  There are no deductions for appraisal, inspections, title searches, settlement fees. etc.

Your down payment is not deductible.

Your homeowners insurance for fire, hazard, flood, etc. is not deductible for your own home.

Home improvements, repairs, maintenance, etc. for your own home are not deductible.  

Homeowners Association  (HOA) fees for your own home are not deductible.

Go to Federal> Deductions and Credits> Your Home to enter mortgage interest, property taxes, and loan origination fees (“points”) that you paid in 2022.  You should have a 1098 from your mortgage lender that shows this information.  Lenders send these in January/early February.