expenses

Keep an Eye Out for Extenders Legislation

The pieces of tax legislation garnering the most attention these days are the Tax Cuts and Jobs Act (TCJA) signed into law last December and the possible “Tax Reform 2.0” that Congress might pass this fall. But for certain individual taxpayers, what happens with “extenders” legislation is also important.

Recent history

Back in December of 2015, Congress passed the PATH Act, which made a multitude of tax breaks permanent. However, there were a few valuable breaks for individuals that it extended only through 2016. The TCJA didn’t address these breaks, but they were retroactively extended through December 31, 2017, by the Bipartisan Budget Act of 2018 (BBA), which was signed into law on February 9, 2018.

Now the question is whether Congress will extend them for 2018 and, if so, when. In July, House Ways and Means Committee Chair Kevin Brady (R-TX) released a broad outline of what Tax Reform 2.0 legislation may contain. And he indicated that it probably wouldn’t include the […]

By |August 21st, 2018|New Tax Laws, tax|0 Comments

3 Traditional Mid-Year Tax Planning Strategies for Individuals that Hold Up Post-TCJA

With its many changes to individual tax rates, brackets and breaks, the Tax Cuts and Jobs Act (TCJA) means taxpayers need to revisit their tax planning strategies. Certain strategies that were once tried-and-true will no longer save or defer tax. But there are some that will hold up for many taxpayers. And they’ll be more effective if you begin implementing them this summer, rather than waiting until year end. Take a look at these three ideas, and contact us to discuss what midyear strategies make sense for you.

  1. Look at your bracket

Under the TCJA, the top income tax rate is now 37% (down from 39.6%) for taxpayers with taxable income over $500,000 (single and head-of-household filers) or $600,000 (married couples filing jointly). These thresholds are higher than for the top rate in 2017 ($418,400, $444,550 and $470,700, respectively). So the top rate might be less of a concern.

However, singles and heads of households in the middle and upper brackets could be pushed into a higher tax bracket much more quickly this year. For example, for 2017 the threshold for the 33% tax bracket was $191,650 for singles and $212,500 for heads of households. […]

Do You Know the ABCs of HSAs, FSAs and HRAs?

There continues to be much uncertainty about the Affordable Care Act and how such uncertainty will impact health care costs. So it’s critical to leverage all tax-advantaged ways to fund these expenses, including HSAs, FSAs and HRAs. Here’s how to make sense of this alphabet soup of health care accounts.

HSAs

If you’re covered by a qualified high-deductible health plan (HDHP), you can contribute pretax income to an employer-sponsored Health Savings Account — or make deductible contributions to an HSA you set up yourself — up to $3,450 for self-only coverage and $6,900 for family coverage for 2018. Plus, if you’re age 55 or older, you may contribute an additional $1,000.

You own the account, which can bear interest or be invested, growing tax-deferred similar to an IRA. Withdrawals for qualified medical expenses are tax-free, and you can carry over a balance from year to year.

FSAs

Regardless of […]

By |June 26th, 2018|affordable care act, Health care, hsa|0 Comments

Law Change Affects Moving, Mileage and Travel Expenses

3WRHLOss

The Internal Revenue Service recently provided information to taxpayers and employers about changes from the Tax Cuts and Jobs Act that affect:

  • Move related vehicle expenses
  • Un-reimbursed employee expenses
  • Vehicle expensing

Changes to the deduction for move-related vehicle expenses

The Tax Cuts and Jobs Act suspends the deduction for moving expenses for tax years beginning after Dec. 31, 2017, and goes through Jan. 1, 2026. Thus, during the suspension no deduction is allowed for use of an automobile as part of a move using the mileage rate listed in Notice 2018-03. This suspension does not apply to members of the Armed Forces of the United States on active duty who move pursuant to a military order related to a permanent change of station.

Changes to the deduction for un-reimbursed employee expenses

The Tax Cuts and Jobs Act also suspends all miscellaneous itemized deductions that are subject to the 2 percent of adjusted gross income floor. This change affects un-reimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel.

Thus, the business standard mileage rate listed in Notice 2018-03, which was issued before the Tax Cuts and […]

By |May 31st, 2018|irs, moving expenses|0 Comments

Expanded Use of 529 Account Funds

thumbnail_large

Under pre-Act law, funds in a Code Sec. 529 college savings account could only be used for qualified higher education expenses. If funds were withdrawn from the account for other purposes, each withdrawal was treated as containing a pro-rate portion of earnings and principal. The earnings portion of a non-qualified withdrawal was taxable as ordinary income and subject to a 10% additional tax unless an exception applied.

“Qualified higher education expenses” included tuition, fees, books, supplies, and required equipment, as well as reasonable room and board if the student was enrolled at least half-time. Eligible schools included colleges, universities, vocational schools, or other post-secondary schools eligible to participate in a student aid program of the Department of Education. This included nearly all accredited public, nonprofit, and proprietary (for-profit) post-secondary institutions.

New law. For distributions after Dec. 31, 2017, “qualified higher education expenses” include tuition at an elementary or secondary public, private, or religious school, up to a $10,000 limit per tax year. (Code Sec. 529(c) (7), as added by Act Sec. 11032(a))

By |January 12th, 2018|college tax credit, education credit, New Tax Laws|0 Comments

Tips for Tax Payers Traveling for Charity

3WRHLOss

During the summer, some taxpayers may travel because of their involvement with a qualified charity. These traveling taxpayers may be able to lower their taxes.

Here are some tax tips for taxpayers to use when deducting charity-related travel expenses:

  • Qualified Charities.  For a taxpayer to deduct costs, they must volunteer for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are generally qualified, and do not need to apply to the IRS. A taxpayer should ask the group about its status before they donate. Taxpayers can also use the Select Check tool on IRS.gov to check a group’s status.
  • Out-of-Pocket Expenses.  A taxpayer may be able to deduct some of their costs including travel. These out-of-pocket expenses must be necessary while the taxpayer is away from home. All costs must be:
    • Unreimbursed,
    • Directly connected with the services,
    • Expenses the taxpayer had only because of the services the taxpayer gave, and
    • Not personal, living or family expenses.
  • Genuine and Substantial Duty.  The charity work the taxpayer is involved with has to be real and substantial throughout the trip. The taxpayer can’t deduct expenses if they only have nominal duties or do not […]
By |July 28th, 2017|charity, deduction, tax|0 Comments

Claiming a Tax Deduction for Medical and Dental Expenses

israel-express-medical-12

Your medical expenses may save you money at tax time, but a few key rules apply. Here are some tax tips to help you determine if you can claim a tax deduction:

  • You must itemize.  You can only claim your medical expenses that you paid for in 2014 if you itemize deductions on your federal tax return. If you take the standard deduction, you can’t claim these expenses.
  • AGI threshold.  You include all the qualified medical costs that you paid for during the year. However, you can only deduct the amount that is more than 10 percent of your adjusted gross income.
  • Temporary threshold for age 65.  If you or your spouse is age 65 or older, the AGI threshold is 7.5 percent of your AGI. This exception applies through Dec. 31, 2016.
  • Costs to include.  You can include most medical and dental costs that you paid for yourself, your spouse and your dependents. Exceptions and special rules apply. Costs reimbursed by insurance or other sources do not qualify for a deduction.
  • Expenses that qualify.  You can include the costs of diagnosing, treating, easing or preventing disease. The […]
By |March 11th, 2015|deduction, medical deduction|0 Comments

College Tax Credit Reminder

college

The IRS recently reminded taxpayers that back-to-school time is a good time to see if they qualify for education-related tax credits. The American Opportunity Credit (AOC) and Lifetime Learning Credit (LLC) are available to taxpayers who pay qualifying expenses for eligible students. The maximum AOC is $2,500 per student, 40% refundable, and available for the first four years of postsecondary education. The LLC is limited to $2,000 per tax return, nonrefundable, and available to both graduate and undergraduate students. Only one credit can be claimed for a particular student in a tax year.

By |October 6th, 2014|college tax credit, credit, tax credit|0 Comments