Editor’s Note: This article was originally published in the 2016 Winter Issue of Alabama Medicine magazine.
Holidays are over. The tree has been undressed and put away until next year. Your New Year’s Resolutions are drafted, and you’re waiting for the last piece of Christmas cake to be eaten before starting them. It’s also the time of year when you start looking on the calendar to count the days until the next holiday. First is Valentine’s Day, then Easter, and then National Tax Filing Day. (I’m sure that last one is included on most calendars, right?)To help you get ready for National Tax Filing Day, here are some reminders of often overlooked tax deductions which could help reduce your taxes in 2016.
To help you get ready for National Tax Filing Day, here are some reminders of often overlooked tax deductions which could help reduce your taxes in 2016.Job hunting expenses For many Americans, the cost of finding a job could be considerable if they have been actively looking from city-to-city or state-to-state. The Department of Labor has reported employers adding jobs with net job gains in the number of jobs created. Job hunting expenses includes transportation, food and lodging for overnight stays. It might include secretarial expenses if you paid someone to type or print your résumé.
Job hunting expenses For many Americans, the cost of finding a job could be considerable if they have been actively looking from city-to-city or state-to-state. The Department of Labor has reported employers adding jobs with net job gains in the number of jobs created. Job hunting expenses includes transportation, food and lodging for overnight stays. It might include secretarial expenses if you paid someone to type or print your résumé.Charitable contributions Checks, cash or charge. If you donate cash over $250, be sure to get a receipt. If you donate goods such as good used clothing, those unused golf clubs sitting in the corner of your garage, furniture or computers (wipe all data off first), or appreciated property like stock, these are potential tax deductions.
Charitable contributions Checks, cash or charge. If you donate cash over $250, be sure to get a receipt. If you donate goods such as good used clothing, those unused golf clubs sitting in the corner of your garage, furniture or computers (wipe all data off first), or appreciated property like stock, these are potential tax deductions.Reinvested dividends If you sold stocks or mutual funds during 2015, did you participate in a dividend reinvestment program where your dividends were used to buy more shares? If so, these reinvested amounts add to your cost basis for computing the taxable gain on the sale. Your financial advisor can provide this information.
Reinvested dividends If you sold stocks or mutual funds during 2015, did you participate in a dividend reinvestment program where your dividends were used to buy more shares? If so, these reinvested amounts add to your cost basis for computing the taxable gain on the sale. Your financial advisor can provide this information.Health insurance premiums If you are self-employed (and not covered by an employer plan or your spouse’s plan), you may be eligible to deduct premiums paid for health insurance, premiums for Medicare Parts B and D, Medigap insurance and Medicare Advantage Plan. This deduction is available whether you itemize or not.
Health insurance premiums If you are self-employed (and not covered by an employer plan or your spouse’s plan), you may be eligible to deduct premiums paid for health insurance, premiums for Medicare Parts B and D, Medigap insurance and Medicare Advantage Plan. This deduction is available whether you itemize or not.Retirement plan contributions There are too many options to include the details here. Many entrepreneurs and small business owners who are employed by others but also work in their own business might qualify for an additional retirement plan contribution. You need to talk with your financial advisor and tax preparer. Some of the options include SEP, SIMPLE IRA and 401(k)s.
Retirement plan contributions There are too many options to include the details here. Many entrepreneurs and small business owners who are employed by others but also work in their own business might qualify for an additional retirement plan contribution. You need to talk with your financial advisor and tax preparer. Some of the options include SEP, SIMPLE IRA and 401(k)s.
Inherited IRA or pension If you inherited an IRA or 401(k) or another retirement plan from your spouse or a parent, you may be able to deduct the estate tax paid by the IRA owner. Also remember that withdrawals you take are taxable and could be subject to penalty if you took money out before you were 59 ½.
Expensing vs. capitalizing assets In 2014, the rules changed regarding what was required to be capitalized and depreciated. In 2015, the IRS gave us some additional relief by increasing the amount that could be expensed from $500 to $2,500. This safe harbor exception was good news for business owners to expense eligible purchases costing under $2,500 or less per item or per invoice.
Immediate write-off As 2015 was coming to a close, Congress voted to extend several expired tax provisions that will save businesses and individual taxes. Legislation known as PATH Act extended or made permanent a number of tax provisions including immediate expensing of eligible purchases of up to $500,000. To qualify for these deductions, assets must have been placed in service by no later than the end of your business’s tax year. The legislation also extends the 50 percent bonus depreciation for qualifying property acquired and placed in service during 2015 through 2017.
Credit card purchases This one could easily slip by a business owner or individual. A payment on your credit card is not deductible; neither is the interest paid on the card. However, if you have purchased business items or made tax deductible purchases charged to a credit card in December, you count the expense as having occurred in December and claim your deduction on that year’s tax return. You need to keep the vendor or store receipt. Submitting the credit card statement is not enough. If you haven’t already, consider using a separate credit card used strictly for business purposes.
Roth IRAs for your kids If you have teenaged children who work, some of their earned income could be used to make a ROTH IRA contribution. For 2015, this could be as much as $5,500 depending on the amount of their earned income. There is no tax deduction for this contribution but the savings comes later – when they withdraw the money for college or moving out of your house or for their first car.
Now that you have thoroughly planned for National Tax Filing Day, you can start packing for Spring Break!
The information in this article is not intended as tax or legal advice. Please consult your tax advisor for specific information regarding your individual situation.
Contributed by Patti G. Perdue, CPA.CITP, Jackson Thornton CPAs and Consultants. Jackson Thornton is a Certified Public Accounting and consulting firm. Our Healthcare group specializes in accounting, practice management, strategic planning, technology and wealth management for physician practices.