Q. I understand there is a tax deduction for mortgage insurance, provided that your income is less than $100,000 per year. Are flood insurance and home insurance also deductible if your income is under $100,000?
Mortgage insurance premiums paid on your personal residence or second home would be deductible as an interest deduction on Schedule A (itemized deductions) on Form 1040. The deduction phases out once your adjusted gross income (AGI) exceeds $100,000 for single and joint filers and $50,000 for married filing separately.
Flood and homeowners insurance are not deductible unless a portion of your home is used for business (for example, a two-family house). Based on the percentage of the property that is for business use, you would be allowed to deduct flood and homeowner insurance proportionately.
You must report rental income and expenses on business-use property on Schedule E of form 1040. — Eugene J. Varsalona is a certified public accountant in Little Ferry.
Q. When does it make sense for New Jersey taxpayers to do the work to amend a prior return? For example, we realized after filing for 2010 that total out-of-pocket medical expenses can possibly be deducted if they exceed more than 2 percent of adjusted gross income in New Jersey.
Individual income tax returns are amended on Form 1040X if you are amending a federal return and N.J. 1040X if you are amending a New Jersey return. According to the Internal Revenue Service, you can amend a return to correct the original return filed, make elections after the prescribed deadline, change amounts adjusted by the Internal Revenue Service or claim a carryback due to an unused credit.
Amended returns for both federal and state purposes must be filed within three years (including extensions) after the date the original return was filed or within two years after the date the taxes were paid, whichever is later.
Interest and penalties will be assessed against any balance due on the amended returns, so it is best to amend the returns as soon as an error is found.
I would recommend amending the N.J. 1040 if you determine that the out-of-pocket medical expenses exceed 2 percent of your New Jersey adjusted gross income. If you are entitled to a refund, you should claim it. — Thomas J. Braun is a certified public accountant in Park Ridge.
Tax questions? The Record's committee of local experts may be able to help. Accountants from theBergen County Chapter of the New Jersey Society of Certified Public Accountants, who are volunteering their time, will answer questions in The Record's Business section weekly until April. Email firstname.lastname@example.org with "Tax Mailbag" in the subject line.