Tag: tax


How Taxes on Recreational Marijuana Are Boosting Colorado’s Economy

January 9th, 2015 — 2:31pm
It's Early, But The Weed Tax Is A Windfall For States

It’s Early, But The Weed Tax Is A Windfall For States

The numbers are in, and the legal sale of recreational marijuana is, by all accounts, a success in Colorado, having earned $2 million in taxes related to the sale of recreational marijuana in just the first month of 2014. Unlike Washington State, which legalized the sale of recreational marijuana in the same 2012 election, Colorado taxes marijuana at a variety of levels: there is a 10% statewide sales tax for recreational marijuana in addition to the state’s 2.9% sales tax and a 15% “retail marijuana excise tax,” among others, turning sales of marijuana into a veritable windfall for the state.

These profits have led to questions on both sides of the political aisle, both among those who favored the legalization effort and those who were against it. One major talking point to rise from the promising tax profits has everyone talking: how the money from marijuana sales will be spent. Last year Colorado voters voted to put $40 million of the funds toward education and school construction, but the state has yet to decide what to do with the rest of the money. By any measure, this is an excellent problem to have.

Pot Tourism: A Secondary Growth Industry

Approximately half of the $1 million spent at legal pot stores every day comes from out-of-state tourists looking to smoke legal, quality marijuana. The money from these happy tourists doesn’t just affect the recreational marijuana market, either: tourists also spend at other establishments, restaurants, hotels and other recreational pursuits. It’s still unclear how large an impact marijuana tourism will have on the state’s economy, but given that tourism in Colorado brings in $11.2 billion annually, even a small slice of the pie will bring in big bucks.

What to Do With All That Tax Money: A New Sin Tax?

In April a Colorado legislative committee approved a caution spending plan for marijuana tax revenue: the money will largely fund prevention of youth drug use, subsidizing addiction treatment programs and starting research and publication campaigns. While the governor originally proposed nearly $75 million on these efforts, but scaled back his proposal to around $54 million; the Joint Budget Committee calls for spending of up to $31.4 million. Those in favor of marijuana legalization praised the move, saying that it offers a neat solution to the concern that the law be enforced and that retailers be required to do everything by the book.

As legislation and tax revenue spending continue to be discussed, one thing is certain: marijuana legalization in Colorado is a windfall for the state, and new businesses are being developed to accommodate the new influx of tourists and visitors. With each of those tourists likely to spend his or her money on lots of goods and services besides marijuana, the potential for increased tax income is enormous.

The “highest state,” thanks to slow early growth, may not have to find answers to the many questions about how to spend the increased tax revenue this year. Recreational marijuana is far from being an unopposed success, but detractors have begun to fall silent in the wake of such favorable early reports. Even the opposition’s claims that marijuana legalization would cause an uptick in crime have turned out to be largely unfounded. In many circles legal weed is starting to be looked at no better or worse than the vice of legal gambling; which also brings in enormous tax revenue.  But as the industry continues to grow and bring in ever greater amounts of money, it seems unlikely that all the proceeds will be funneled directly into anti-drug campaigns. Where the rest of the money will go remains to be seen.

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The Affordable Care Act Includes a Tax on Medical Devices. Is That a Bad Thing?

January 8th, 2015 — 10:00am
What's The Big Deal About The Medical Device Tax?

What’s The Big Deal About The Medical Device Tax?

Were one to listen to the bipartisan rhetoric that has been whipped up in the House against the Affordable Care Act’s 2.3% excise tax on medical devices, it’s easy to see how a relatively small tax can be enough to scare a whole lot of people. Everything from the claims of company closures to the threat of over 43,000 American jobs being shipped overseas is being blamed on this tax, so finding the truth can take a bit of digging past the $150 million spent on lobbying against it since 2008.

What Is this Tax and Why Does it Exist?

The ADA Medical Device Excise Tax is a 2.3% tax on medical devices. Everything from gloves to stethoscopes to X-ray machines is subject to the tax. The law is unconcerned with and doesn’t specify where the device needs to be made to be taxed, as long as it is being sold in the U.S. However, if a device is exported to be sold elsewhere, the tax does not apply. The tax was created as part of a way to ensure that the ACA helps fund medical insurance coverage and is intended to produce $29 billion in revenue. However, in 2013 it was discovered that even the expected amount of tax is not being collected. Because the medical device industry has spent millions to ensure a causal association between the tax and lost jobs, Congresspeople of both parties are worried about the effects of the law on constituent companies in their areas.

“43,000 Jobs Lost”

A statistic often repeated in industry papers and invoked in the halls of Congress is that tens of thousands of American jobs have been lost as a result of the addition of the tax. The most common claim, that 43,000 jobs were (or will be) lost, comes from a study by Diana and Harold Furchtgott-Roth commonly cited by AvraMed and other lobbying companies. However, when called on to discuss the study by the Annenberg Institute, the lobbying group revealed that the number was actually significantly smaller and that in fact many of the losses had nothing to do with the excise tax at all.

Whether the Tax Is at Issue or Not, It Will Be Coming Up In 2015

As the medical device lobbying industry has been using a flawed statistic on which to found its claim, and the White House isn’t blinking, this will probably become an issue in the new term among the new Republican Congress. But are they likely to vote against the tax? While it’s hard to say for certain, it’s been predicted that they will vote to repeal the Affordable Care Act first (expecting that effort to fail) and then begin to attack supporting pillars of the Act, such as the Medical Device tax.

How successful such a strategy will ultimately be depends on the political will of the President, who may very well try to find another $30 billion to cover for the potential loss, and the collective will of the new Republican Congress hungry to damage the President’s agenda. Depending on whether or not cuts can be made elsewhere to compensate for the loss, the medical device tax is one that the President seems willing to lose to keep his signature legislation alive.  However, this calculus can change depending on the amount of cooperation the Executive & the Legislative branches show each other.

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What California and Kansas Can Teach Us about the Laffer Curve and Tax Theory

January 6th, 2015 — 10:00am
The Real Laffer Curve?

The Real Laffer Curve?

Since the economic collapse that began in 2008, politicians and lawmakers all across the United States have been on the move to enact policy that will stimulate the economy and bring back jobs. Tax policy has inevitably become part of this national discussion. The Laffer Curve, an economics theory that posits that cutting taxes is beneficial for economic stimulation, has been put to the test in two real life scenarios that have played out in Kansas and California. The results provide significant evidence that calls into question the well-worn principle that a higher minimum wage decreases overall employment and income.

Arthur Laffer’s Theory

The Laffer Curve, one of the fundamental tenets of supply-side economics, was popularized by the economist Arthur Laffer in the late 1970s. As a curve, it merely demonstrates the relationship between tax rates and total tax revenues collected by the government. According to this construct, the effect of a lower tax rate is an increase in work, output, and employment whereas a high tax rate penalizes these activities. The curve is often used to explain and justify the pro-growth worldview of supply-side economics. It should be noted, however, the Laffer Curve does not say definitively that a tax cut will raise or lower revenues. For example, a tax rate of 100% wouldn’t collect more money than a rate of 25%, as no one would be willing to work for an after-tax income of $0. The value of the Laffer Curve is its ability to predict economical behavior based on simple arithmetic truths.

Kansas Tax Cuts & California Tax Hikes

In the case of Kansas, after the election of Sen. Sam Brownback as governor in 2010, the state rolled out a new tax policy, a virtual low-tax paradise that was eventually meant to eliminate the state income tax. Brownback’s administration consulted Laffer on tax cuts and enacted these measures in the hopes that, according to the Laffer Curve, they would help to fuel the stagnant economy. The measures, called “the largest tax cut ever” at the time, were enacted in 2012. It quickly became clear that Kansas’ economy was not following the upward trajectory the Laffer Curve predicted it should. As a result, the state’s credit rating was lowered, first by Moody’s Investors Service and later by Standard & Poor’s, who cited “a structurally unbalanced budget.”

Meanwhile in California, tax rates were rising as much as 30 percent, raising the sales tax to the highest in the nation at 7.5 percent. The Laffer Curve indicates that California’s job growth should have slowed to a crawl and brought the state’s economy to a grinding halt. This October Governor Jerry Brown was happy to announce that the measures had quite the opposite effect, stating “California is back.”

Contradictory to what proponents of the Laffer theory may have predicted, it was California that came out the winner. Jobs in the state grew at a rate 3.4 times greater than in Kansas, and non-farm payroll jobs increased 7.2 percent in California compared to just 2.1 percent in Kansas. California’s credit rating also improved, unlike Kansas’, which means that the state can borrow money at much lower rates than Kansas can. So what happened? Do these real-life contradictions mean that the Laffer Curve doesn’t work?

What Real Life Contradictions Mean

No economic model is perfect. If anything, what these real world contradictions tell economists is that their models need more refinement, but it sends a message to politicians as well. The real world will always trump theory, and changes in policy would be better based on actual data about the number of jobs and what they pay rather than projections, ideology and theory.

It could be that raising the minimum wage will, in the fullness of time, lead to different results. California’s economy could still collapse, and Kansas could see the job growth its experts hoped for originally.  Kansas may fall behind yet further with their frozen minimum wage. For now, it would be wise of policymakers to look at the results and take note. No theory, however compelling, should be more persuasive than real-life results.

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Will the New Congress Be Able to Make Any Progress on Tax Reform?

January 5th, 2015 — 1:16pm
Tax Reform?  Really?

Tax Reform? Really?

After the November 4th elections this year, it was widely expected that Republicans would take a majority in the House and Senate. Republican leaders campaigned toward victories on promises of change, though it is unclear just how much change will actually be accomplished. While the Obama administration has for years been interested in tax reform, particularly concerning American companies using a technique called “inversion” to repatriate their profits, given the GOP’s track record, it is not surprising that many think major changes like a tax reform bill has little chance of reaching the President’s desk. Chances may be slim that real reform is going to get passed, but small-scale reform may still be possible.

The Tax Code’s Just Too Big

While many politicians have a lot to say about a “simplified tax code” on everything from foreign taxation to the Affordable Care Act, chances are slim that any reforms of substance will be passed by the new Congress. Why? Because any attempt to gut the President’s healthcare legislation through the tax code will most certainly be vetoed, and many Republicans quietly like what “Obamacare” has brought to the table.

Add to the threat of veto a general distaste among voters for re-arguing issues (like Roe V. Wade) that have already been settled, and it becomes clear that there will be no grandiose simplifications of the code that many have long clamored for. As a result, any type of innovation regarding the tax code will likely be more incremental reform.

There Isn’t Enough Time, But There Is Opposition

In order to have enough time to enact meaningful tax reform, the new Congress will have to begin almost immediately. Republicans will need to be very quick to lay out their key points for change, any of which could easily ignite Democratic opposition and lead to pushback.  However, many Republicans are eager to show voters that they can indeed govern, which could potentially lead to compromise on these types of issues.

In an ideal world, the subsequent debate would be enough to begin work on a bill that could take until the next election to craft. Before the bill could be passed, however, lobbies benefiting from the status quo would push to delay a vote, or even move political money to opponents to get the innovators out of office. This jockeying won’t affect the president during the final months of his second presidential term, but it would likely cast a pall over any incentive from Congress to proactively push for tax reform.

In short, unless the a President is committed to tax reform in partnership with a willing Congress and had a four-year term (at the least) to outlast entrenched lobbyists focused on keeping things as they are, meaningful tax reform remains a long shot.

So What Chance of Change is There?

Ultimately, it will be up to the Republican majority and the president to set the tone for any potential talk of tax reform. The real question is whether either sides is willing to consider their common ground and take a stand for the greater good, even when that stance might prove to be unpopular. When outgoing Representative Dave Camp (R-MI) brought up tax reform earlier this year, his attempts to bring the focus back to tax reform were dismissed by Speaker John Boehner, who was heard to say “blah blah blah” in response.

In short, if small reform measures can attract the attention span of the new Republican Congress, they might pass. Otherwise, the chances of real tax reform over the next two years are slim.

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2015 Tax Season Delayed

December 18th, 2014 — 11:55am
Filing Season Delayed...AGAIN!

Filing Season Delayed…AGAIN!

R&G Brenner has just been informed by our commercial tax software provider, that the IRS has indicated that the 2015 tax season (for filing tax returns for tax year 2014) will be delayed AT LEAST until January 23, 2015.  This means the season could potentially be delayed even beyond 1/23.

While delaying the start of the tax season has become a routine occurrence, this tax season could prove to be especially difficult.  The recent spending agreement passed by congress and expected to be signed by President Obama, cuts the IRS Budget down to levels not seen since 1998:

It is a cynical recipe for a self-fulfilling disaster: Give the [IRS] more and more work. Cut its budget. Blame it for failing to do its job. Repeat…For context, in 1998, taxpayers filed about 125 million individual returns. Last year, the agency had to process 145 million.

The IRS Commissioner, John Koskinen, pleaded with members of congress to increase the IRS’ budget and to act quickly on deciding to renew or let multiple tax laws and patches expire…all of which fell upon deaf ears.  Mr. Koskinen has now dubbed the 2015 tax season “one of the most complicated filing seasons we’ve ever had”  The National Taxpayer Advocate was even more forceful, calling this season “misery” & “the worst filing season ever” for taxpayers.

If there was ever a year to have a tax professional on your financial team, this is it!  Contact an R&G Brenner professional today and we’ll help you tackle what is shaping up to be a very difficult tax season.

UPDATE:

The filing season will commence on January 20th, 2015.

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“Worst Filing Season Ever” Predicted For Taxpayers

November 5th, 2014 — 12:17pm
I just got hung up on by the IRS...again!

I just got hung up on by the IRS…again!

IRS Commissioner John Koskinen recently suggested that the 2015 tax filing season could be misery for taxpayers and IRS employees alike. Between extensive wait times to speak to a representative, implemented laws that have not yet been reflected in the tax code and congressional gridlock, this may be the worst tax season on record.

“The filing season is going to be the worst filing season since I’ve been the National Taxpayer Advocate [in 2001]…” said National Taxpayer advocated Nina Olson.  “…I’d love to be proved wrong, but I think it will rival the 1985 filing season when returns disappeared.”

The major obstacles for this year are as follows:

  • The IRS budget has been slashed.  While the House has tried to reduce the budget, the Senate has proposed to increase the budget by $240 Million.  Even in the slim chance that it passes, that increase would still amount to a 7% decrease to the IRS’ 2010 budget.
  • Multiple laws congress has passed, the IRS has yet to implement into its systems.  The Affordable Care Act (ACA), The Foreign Account Tax Compliance Act (FACTA) and other laws require information from health care providers and other agencies in order to process tax returns correctly…and that is before the antiquated computer systems of the IRS have to be updated
  • The uncertainty surrounding “Tax Extenders”; multiple tax laws that either need to be extended, adjusted and/or replaced.  There are currently over 50 of them.  If these laws are not addressed before December, the tax season itself could be delayed

Until all these issues are resolved, you can expect extra long waits and dropped calls at the IRS like last year when nearly half of the phone calls to the IRS went unanswered.

With all this uncertainty, if there was ever  year to have the help of a qualified tax professional, this is it. Contact R&G Brenner today to find out how we can help you.  “Saving you time and money is what we’re all about”.

Source: Forbes

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October 15 Tax Extension Deadline

October 14th, 2014 — 10:33am
Tick-Tock, The Deadline Approaches

Tick-Tock, The Deadline Approaches

The deadline to submit 2013 tax returns to the IRS for taxpayers who elected to file extensions is Wednesday, October 15th.  Failure to do so may result in the penalties and interest assessed on due taxes.  Please note, that if you did not file your taxes yet, and did not file for an extension, your taxes were due on April 15th and you are already accruing penalties and interest on any taxes due.

If you need assistance filing your tax return (whether on extension or not), please contact an R&G Brenner tax professional as soon as possible in order to meet the deadline.

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What Happens If You Don’t File Your Taxes?

August 14th, 2014 — 11:00am

Overdue Taxes Will Come Back To Haunt You

Overdue Taxes Will Come Back To Haunt You

The only certainties in life are death and taxes, as the saying goes. Taxes are an annual event that, however unpleasant, we all have to deal with. It may interest you to know that according to the Internal Revenue Service (IRS), an estimated 239.3 million tax returns were filed in 2012 by individuals and businesses in the United States. That amount exceeded by a little more than 1% the number of returns that were filed in 2011, and by 2018 that number is projected to grow by almost 6% to 253.5 million tax filings.

What about those individuals who do not file a regular tax return? More importantly, what would be your fate if you did not pay your taxes in a timely manner? Below are some of the potential consequences that you may face for failing to file or pay your taxes in a timely manner.

Failure to File Penalty

Whether you owe taxes or expect a refund for a given tax year, it is important to provide the IRS with an informational tax return on or before April 15th of every year. When you miss the April 15th deadline you are subject to a penalty of 5% of the amount that you owe for each month you do not file. The penalty for failure to file can grow to 25% of the total unpaid amount.  If you file a return 60 days after the due date of April 15th, you will be subject to a penalty of $135 or 100% of the unpaid tax liability, whichever is greater. This applies to both those expecting a refund and those who have taxes due.

Failure to Pay Penalty

In addition to the failure to file penalty that you face for missing the filing deadline, you are subject to a failure to pay penalty of half of 1% of the unpaid balance. This amount is assessed each month that your taxes go unpaid and is capped at 25% of the unpaid amount. Generally the failure to file penalty is higher than the failure to pay penalty. Filing a tax extension (Form 4868) on or before April 15th and paying some or up to 90% of the amount owed, as well as paying the balance in full by the extension deadline (typically 6 months or by October 15th), will help you avoid the failure to file and failure to pay penalties.

Loss of a Tax Refund

If you are owed a refund from the Federal government, filing a tax return by the deadline is the only way for you to ensure that the money will be returned to you in a timely manner. The IRS can hold a taxpayer’s refund for up to 3 years. After this time your refund is treated as a “gift” to the government and will remain in the treasury. This means that your failure to file could result in a generous donation of your tax refund to the federal government to do with as they please.  Don’t let that happen…

Loss of Wages, Assets or Arrest

If you do not pay your taxes, the IRS will eventually come after you directly. There initial contact will be a letter informing you of your outstanding liability (or failure to file) with an opportunity to file an amended return. Ignoring this opportunity will result in a possible wage garnishment and even seizure of your assets, such as your home or car. If the amount of your tax liability is deemed by the IRS to be excessive you may be arrested and charged with tax evasion, subject to a fine of up to $100,000 and up to 5 years in prison. 

Suspension Of Drivers License

Some states like New York are suspending the drivers licenses and/0r disallowing the renewal of licenses for those that have not paid their taxes.  This recently went into effect in 2013.  Expect more and more states (especially those with budget issues) to follow suit.

Not filing your taxes, or failing to pay them, is a serious concern and should not be taken lightly. If you need help filing your taxes, or you’ve missed a deadline and need to know what your next steps should be, don’t hesitate to contact an R&G Brenner professional tax preparer.

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Tax Breaks for Going Green

August 11th, 2014 — 11:00am

How To Save Money "Going Green"

How To Save Money “Going Green”

Going green isn’t just the next big thing—it’s the wave of the future. There is abundant information available about ways in which you can reduce your carbon footprint, save money and feel better about your role in the stewardship of this planet. Both federal and many state governments recognize the importance of energy savings and conservation and have provided tax breaks and incentives to businesses and individuals to encourage energy efficiency and going green.

Knowing what tax benefits may be available to you when you choose to go green may be enough to help you decide to start your own plan for energy conservation. There are certain tax breaks that are available just for businesses and others that individuals may take advantage of. Here is a discussion of green tax benefits and some of the tax breaks you may qualify for, either as an individual or as a business owner.

Tax Benefits Associated with Going Green

Tax benefits that are associated with going green can be classified as a tax credit, a rebate or savings in the cost of purchase. Tax credits are a dollar-for-dollar reduction of your overall tax bill—if you qualify for a $1000 tax credit, it means you owe $1000 less in taxes. There are also loan and grant programs that states offer to certain businesses that serve as an incentive to encourage the use of alternative energy and green certified building materials in new building construction and renovations.

If you choose to install an energy efficient solar hot water heater, solar equipment that generates electricity or even a wind turbine before December 31, 2016, you may be eligible for tax credits associated with these installations.

Green Tax Breaks for Individuals

Green tax breaks that are available for individuals come in the form of tax credits, rebates or upfront savings. Depending on your tax situation, you may choose a program that offers a tax credit in order to reduce your tax liability. If you have a need for income upfront, a rebate or savings incentive may be in order. The types of programs that are available vary from state to state, so it is a good idea to find information in your local area about incentives that may be available to you as a resident.

For example, residents (including commercial and industrial sector businesses) of the State of California may qualify for a property tax exclusion of up to 100% of the value of the installation of a solar energy system in a new building construction. Illinois residents may receive a special assessment to reduce their property taxes by registering qualified solar energy equipment on their property.

Green Tax Breaks for Businesses

Just as individuals are provided with breaks for going green, businesses may want to get into the act as well. The Tax Relief and Job Creation Act of 2010 helped to extend certain Federal energy tax benefits for businesses. These include tax credits for home builders, manufacturers and commercial buildings. There are also credits available to businesses that use vehicles that are hybrids, electric powered or use alternative fuels. Access to these green energy tax credits for business can be obtained through filing the appropriate form (such as Form 8908 and 8909).

Going green, either as an individual or as a business owner, isn’t just great for the environment, it’s great for your budget. There are numerous tax breaks and incentives available for using more energy-efficient vehicles, sustainable energy, and recycled building materials. Check with an R&G Brenner tax professional to see which tax breaks you might be entitled to. 

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Tax Tips for Homeowners

August 7th, 2014 — 11:00am

Important Tax Tips For Homeowners

Important Tax Tips For Homeowners

There are tax breaks that come along with owning your home. These breaks may serve as an incentive for the purchase of homes within certain targeted areas of the country or may make up for any losses a homeowner might face when selling his or her home. As a homeowner it is important to understand what tax breaks are available to you in order for you to take advantage of them and help your tax situation.

These include tax breaks that come when you sell your home, breaks for losses associated with a sale and incentives for certain types of homebuyers, such as first-time home buyers. Here are some tax tips for homeowners or anyone looking to purchase their first home.

Common Tax Breaks

As a homeowner, one of the most common deductions you will take is the one for the interest you pay on your mortgage. The mortgage interest deduction allows a homeowner to receive a reduction in their taxes, with the ability to deduct interest for a home valued at $1.1 million or less. In addition to the mortgage interest deduction, low-income homeowners who were required to take out private mortgage insurance to secure a loan (not to be confused with homeowner’s insurance). This particular deduction may be expiring soon, so it is important to claim it as a homeowner if you qualify.

Tax Incentives for First-time Homebuyers

If you first purchased a home in 2008, 2009 or 2010, you may qualify for a first-time homebuyer credit. This credit, which was extended for purchases with a closing between June 30 and September 30, 2010, reduces your tax bill or increases your refund, depending on how much you owe in taxes already. Qualifying for the credit is based on when you purchased and closed on the purchase, income (based on your modified adjusted gross income) and can be enhanced by military service or working for the federal government. If you received the credit and the home is no longer your primary place of residence, you may be required to repay the balance you received.  

Home Seller Tax Breaks

IRS Publication 523 explains ways in which you as a homeowner can either take an exclusion for any gains from the sale of your home or write off a loss associated with such a transaction. As an example, if you failed to deduct all of the points paid to secure a loan for your mortgage, you may be able to deduct those remaining points in the year in which you sell the house.

Points represent 1% of the loan’s amount that a lender charges in exchange for a lower mortgage interest rate. A maximum exclusion in gains of up to $250,000 from the sale of your home may be taken. The ability to take the exclusion depends on a few factors, which include your meeting the ownership test, use test and other rules. A home owned jointly where separate returns are files permit you and the co-owner to claim up to the maximum exclusion amount on an individual basis.

Tax Help for Homeowners that Experience a Loss

If you were the victim of a catastrophic loss, such as damage from a fire or an earthquake, it may have been covered by insurance but require you to meet an out-of-pocket cost (such as a deductible). You may be able to deduct your costs associated with those losses on your taxes. Although your out-of-pocket amount may be deductible, any loss covered by insurance would not be considered deductible for income tax purposes.

If you’re a homeowner, there are plenty of tax breaks and incentives available to you. Talk with an experienced R&G Brenner tax professional to make sure you’re taking advantage of all the tax credits, deductions, and write-offs to which you are entitled. 

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