Changes to the 2015 Tax Code You Should Know

Part 2 of 2

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In addition to changes in the rules surrounding certain deductions, some popular tax breaks were extended this year beyond their initial expiration date. Here’s a look at some of them:

  • Higher education tuition deduction. You may still be able to deduct between $2,000 and $4,000 of qualified tuition expense. This deduction applies to an accredited post-secondary career school, college or university.
  • Energy credits. If you made energy-efficient changes to your home, you’re in luck. Enhancements such as improved insulation and  upgraded energy-efficient heating/cooling systems are eligible for the energy credit.
  • Educator expense deduction. If you are a K-12 teacher who dipped into your own funds for classroom supplies, you’re in luck. You could deduct up to $250.00 in unreimbursed classroom expenses. You must be a full-time teacher and work 900 hours per academic year to be eligible.
  • Commuting tax breaks. If you take mass transit to work, you could be eligible for a tax break much like those who have employer assistance to cover parking costs. The current deduction is $130.00 per month.
  • Deduction for small business equipment purchases of up to $2 million. This will come in handy if you decide to purchase/upgrade your business equipment. Eligible expenses now include computers and work stations.
  • Work Opportunity Tax Credit. If you own a business, good help can be hard to find, and expensive to hire (training and on-boarding expenses for example. However, Uncle Sam has extended the Work Opportunity Tax Credit. You’ll be eligible for a credit equal to a percentage of wages paid if you hire a permanent worker from any one of these targeted groups: TANF, SSI and SNAP clients, qualified veterans, qualified summer youth program members, vocational rehabilitation clients, to name a few.

Understanding changes to the tax code or extension for tax cuts will go a long way during tax season this year. Since each individual tax scenario is different, we recommend that you consult with a qualified tax pro. He or she will answer your questions, help you determine your eligibility for certain deductions and exemptions, and can even file on your behalf.

The start of tax season doesn’t have to mean unanswered questions and last-minute panic. As the old-school expression states, “Forewarned is forearmed.” The more you know in advance, the less likely it is you’ll be caught by surprise on tax day.

5 More Overlooked Tax Deductions

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Make the most of these overlooked deductions

Yesterday’s post discussed five of the most easily missed tax deductions. Now is a great time to review your receipts and records to see if you qualify for any of these tax deductions.

Hang on to those receipts, however. You’ll need them on tax filing day, and as proof of eligibility for a given deduction should you ever be audited.

As with any deduction, be sure to check with a licensed tax preparer regarding your eligibility for any itemized deduction, especially if this will be your first year claiming that deduction.

IRS tax code is complicated, and a qualified tax pro will be able to assess your unique tax scenario and also determine whether or not you are eligible for these deductions.

1. Education expenses: Education doesn’t come to an end when you receive your diploma or degree. Enrolling in college courses that are specific to your skill set or to train for a new career is a good strategy in today’s economy.

Eligible expenses include books, tuition, fees and supplies not covered by financial aid, scholarships or tuition reimbursement through your employer.

2. Safe deposit box fees: Be sure to keep track of monthly or quarterly safe deposit box fees; you can deduct them at the end of the year.

3. Foster care expenses: The IRS defines a foster child as a child who is placed with you through a court order, judgement, or by a licensed private or government foster care agency. Unreimbursed foster care expenses are also tax deductible.

4. Lead paint removal: If you’re planning on getting rid of the lead paint on that old house you just bought, good news: lead pain removal expenses are tax-deductible.

There is a catch, however. In order for it to be a qualified expense, the lead paint removal must be for the purposes of preventing a child from eating or otherwise consuming the lead-based paint.

The surfaces must also be in bad shape, and be within easy reach of a child who already suffers from lead exposure. In other words, if your child tested positive for lead exposure due to lead-based paint in your home environment, you do have a shot at deducting the paint removal costs.

IRS code relating to this deduction is complicated, so if you will be removing lead-based paint from your current home or a home you just bought, be sure to check with your tax advisor regarding this deduction.

5. Medical travel expenses: If you or a loved one are ill and need to travel out of town for medically necessary treatment, hold onto to all of your travel and lodging receipts.

 

5 Most Easily Overlooked Deductions

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Make the most of the deductions available to you

As the tax year winds down and as the holidays gain momentum, it’s easy to put off thinking about serious matters such as taxes. After all, there are holiday parties to attend, office parties to live down, and visits with friends and family foremost on your list. Once the holiday season is over, however, tax season will be here before you know it.

You might think of tax deductions as something only high-income earners need to worry about, but there are plenty of deductions available for taxpayers of all income brackets. Here’s a look at some of most easily overlooked deductions:

1. Casualty or theft losses: If you lost property in a disaster or via burglary or theft, note it on your tax return. Let’s say you use your car to drive for Uber or Lyft. Your car is totaled in an accident, including some of the contents. You’ll need to claim this deduction on the Schedule A attachment on your federal tax return. The rules surrounding this deduction are complex, so it will be in your best interest to seek the advice of a tax pro.

2. Cell phone: You can claim this deduction only if you use your cell phone for business purposes. Keep copies of your cell phone bill, and note which calls/text charges are business-related. You’ll need these figures at tax time when calculating your deduction.

3. Contacts, glasses, or hearing aids: Your new contacts and back-up glasses may have cost you a fortune, but you can deduct most of the cost at the end of the year by using the Schedule A attachment on your tax return.

4. Fees for prepared childbirth classes if part of pre-natal care: Kids are expensive, even before they arrive. Claim this cost under medical/dental and keep a copy of any documentation verifying medical necessity or completion of the course. You can only deduct any medical/dental costs not covered by insurance, so this won’t work if your insurance company covered the cost of your childbirth classes.

5. Union dues: You can claim your union dues as a deduction, but be sure to keep any documentation that verifies you paid them or they were deducted from your paycheck.

Tommrow: 5 more of the most easily overlooked tax deductions

 

 

 

More Year-End Tax Tips

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If you’ve had a change in your tax scenario for this year (change in marital status, income, or home ownership, for instance) or if you just weren’t happy with last year’s tax outcome, now is a good time to review your year-end tax strategies. Here are some suggestions for grabbing some year-end deductions:

Pay for spring semester: If you’re paying your own college tuition or paying for your child’s tuition, paying for spring semester during the “old” tax year could help your bottom line by lowering your overall tax liability.

By paying spring tuition now, you could be eligible for the Lifetime Learning Credit, or the American Opportunity Tax Credit, depending on your individual financial circumstances.

For example, the American Opportunity Tax Credit is worth up to $2500. Up to 40 percent of the new of the credit is refundable. This credit is designed to make the Hope Scholarship Tax Credit available to a larger range of taxpayers, including those who owe no taxes.

Donate to charity: If you’ve been dragging your feet on cleaning out your closets, a tax deduction for charitable contributions might be just the incentive you need to get started. Qualified charitable organizations typically accept:

  • Cash
  • Gently used household goods, toys, and clothing
  • Vehicles (always check ahead of time. Not all organizations accept vehicle donations)
  • Stocks, bonds, and mutual funds

If you donate any portfolio assets (stocks, mutual funds, bonds) to a 501 (c) (3) charitable organization, you won’t be hit with capital gains taxes.

As with any deduction, be sure to get a receipt or statement from the organization to verify that you did in fact make the donation.

Make adjustments to your health care coverage: Love it or hate it, the Affordable Care Act will be part of the tax landscape for the foreseeable future. If you’ve been skimping on your insurance coverage or skipping out altogether, you could get hit with a penalty under the ACA. 

Now is a good time to either purchase coverage or upgrade your existing coverage to avoid the ACA penalty. Keep in mind you may be eligible for exemptions from this requirement, so it’s a good idea to do some research, especially if you find yourself unable to pay for coverage due to your financial circumstances.

Open a new IRA: If you had a sizable jump in income that leaves you with money left over each month, now might be the time to open a new IRA. Just like your 401K at work, IRA contributions will not be considered income, so you won’t take a tax hit for making contributions. 

Each of these deductions will need to be itemized on your return, so if this will be your first year itemizing your deductions, get all of your receipts organized ahead of time so you’ll be ready when it comes time to file your tax return.

The end of the year is a great time to review your tax strategy for the year and to make some last-minute contributions or adjustments. If you’re unsure about your specific tax circumstances, check in with a qualified tax pro for guidance. A CPA or other financial professional with a tax background will be able to assist you in claiming the right deductions for your individual circumstances.