What's New for this filing season - Tax Changes
The Internal Revenue Service announced earlier this week that the nation’s tax season will begin Monday, Jan. 27 2020 and reminded taxpayers claiming certain tax credits that refunds won’t be available before late February.
Tax Law Changes We computed the adjustments to these amounts for 2019 based on the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). The Tax Cuts and Jobs Act established this method for determining adjustments for the Earned Income Tax Credit and other tax provisions starting with tax year 2019.
Taxpayer Refund Timing –The IRS reminds taxpayers that, by law, the IRS cannot issue refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) before mid-February. While the IRS will process those returns when received, it cannot issue related refunds before mid-February. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting on Feb. 15, 2020, if they chose direct deposit and there are no other issues with the tax return.
The IRS still anticipates issuing more than nine out of 10 refunds in less than 21 days.
IRS News Releases
Please Wait on All Documents to be before filing your Income Taxes – This year when you bring your documents such as W2’s, 1099’s etc.…other than Driver’s license and social security cards…PLEASE BRING NEW HEALTH FORMS:
1095-A (Coverage through Health Insurance Marketplace)
1095-B (Health Insurance Providers (Medicaid or Medicare)
1095-C (Employer-Provided Health Insurance Offer and Coverage
Each year the Health Insurance Marketplace has an open enrollment period. The open enrollment period to purchase health care insurance for 2018 is through January 31, 2016. Contact the Marketplace at HealthCare.gov to enroll and to get information about financial assistance to purchase health care coverage for you and your family.
IRS “Where is my refund” tool. – The IRS has improved their “Where is My Refund” tool on IRS.gov. The displayed tax return statuses will include Tax Return Received, Refund Approved, and Refund Sent. It will also show the taxpayer the expected date of the refund.
The filing deadline to submit 2018 tax returns is Tuesday, April 15, 2019, rather than the traditional April 15 date.
Take a look at my website www.landinghamenterprises.com . Now is the time to get ready for this tax season, attached are some helpful tools to get you organized. Please take time to complete the 2018 Tax Organizer or Tax Interview and make your appointment soon!
Affordable Care Act Overview
What is the Affordable Care Act?
Under the Affordable Care Act, the federal government, state governments, insurers, employers, and individuals share responsibility for improving the quality and availability of health insurance coverage in the United States. The ACA reforms the existing health insurance market by prohibiting insurers from denying coverage or charging higher premiums because of an individual’s preexisting conditions.
The ACA also creates the Health Insurance Marketplace, also known as the Marketplace or the Exchange. The Marketplace is where taxpayers find information about health insurance options, purchase qualified health plans and, if eligible, obtain help paying premiums and out-of-pocket costs. A new tax credit, the premium tax credit, is available only if the taxpayer purchased a qualified health plan through the Marketplace. This credit helps eligible taxpayers pay for coverage.
Update
IRS Statement on Health Care Reporting Requirement For the upcoming 2018 filing season, the IRS will not accept electronically filed tax returns where the taxpayer does not address the health coverage requirements of the Affordable Care Act. The IRS will not accept the electronic tax return until the taxpayer indicates whether they had coverage, had an exemption or will make a shared responsibility payment. In addition, returns filed on paper that do not address the health coverage requirements may be suspended pending the receipt of additional information and any refunds may be delayed.
To avoid refund and processing delays when filing 2017 tax returns in 2018, taxpayers should indicate whether they and everyone on their return had coverage, qualified for an exemption from the coverage requirement or are making an individual shared responsibility payment. This process reflects the requirements of the ACA and the IRS’s obligation to administer the health care law.
Taxpayers remain obligated to follow the law and pay what they may owe at the point of filing. The 2018 filing season will be the first time the IRS will not accept tax returns that omit this information. After a review of our process and discussions with the National Taxpayer Advocate, the IRS has determined identifying omissions and requiring taxpayers to provide health coverage information at the point of filing makes it easier for the taxpayer to successfully file a tax return and minimizes related refund delays.
Documents individuals can gather in advance:
Proof of Insurance
Documents supporting exemptions and hardships
1095-A (Coverage through Health Insurance Marketplace)
1095-B (Health Insurance Providers (Medicaid or Medicare)
1095-C (Employer-Provided Health Insurance Offer and Coverage
Series of Yes-or-No Questions help you Determine Eligibility for the Premium Tax CreditThe premium tax credit, or PTC, is a refundable credit that helps eligible individuals and families with moderate income afford health insurance purchased through a Health Insurance Marketplace. To get this credit, you must meet certain requirements and file a tax return.
Answer the yes-or-no questions in this chart – or via accessible text – and follow the arrows to find out if you may be eligible for the premium tax credit.
People are asking…Here are commonly-asked questions that we are hearing from taxpayers and seeing on social media.
Q. What happens if I don’t file or I fail to reconcile my advance payments of the premium tax credit when I file my return?A. Failing to file a tax return or filing your return without reconciling your advance payments will delay your refund and may affect future advance credit payments. The IRS will send you a letter with instructions about what you need to do to resolve this issue, which may include submitting Forms 1095-A and 8962, so we can process your return.
Q. Does everyone need to have health insurance coverage?A. The Affordable Care Act requires you and each member of your family to have basic health coverage (called minimum essential coverage), qualify for an exemption from the requirement to have coverage, or make an individual shared responsibility payment when you file your federal income tax return. If you are not required to file a tax return and don’t want to file a return, you do not need to file a return solely to report your coverage or to claim an exemption.
Q. What are my options to receive help with filing a return and reconciling?A. Filing electronically is the easiest way to file a complete and accurate tax return as the software guides you through the filing process. Electronic filing options include free Volunteer Assistance, IRS Free File, commercial software, and professional assistance. For information about filing a return and reconciling advance credit payments, visit IRS.gov/aca.
For more questions and answers about the health care law, see the Affordable Care Act Tax Provisions Questions and Answers page.
Child-Related Tax Credits. Child-related tax credits, used by families to offset their tax burden, have been extended under ATRA. The child tax credit remains at $1,000 and is still refundable. It is phased out for married couples who earn over $110,000 and single filers who earn more than $75,000. The dependent care tax credit is equal to 35% of the first $3,000 ($6,000 for two or more) of eligible expenses for one qualifying child.
Education. The American Opportunity Tax Credit, which was scheduled to revert to the Hope Credit ($2,500), has been extended through 2017. The credit is used to offset education expenses and is worth up to $2,500.
EITC. The EITC or Earned Income Tax Credit, which benefits low to middle income working families, is extended for five years through the end of 2017. In 2015 the maximum credit is $6,242.
2015 Tax Changes for Individuals - New 2017 Updates coming soon - waiting on final tax laws from congress
Here's what individuals and families need to know about tax changes for 2015.
Update
For Same-Sex Couples and Certain Domestic Partners The following questions and answers provide information to individuals of the same sex who are lawfully married (same-sex spouses). The following questions and answers provide information to individuals of the same sex and opposite sex who are in registered domestic partnerships, civil unions, or other similar formal relationships that are not marriages under state law. These individuals are not considered as married or spouses for federal tax purposes. Additional information on these issues may be found in Notice 2013-61, Revenue Ruling 2013-17 and news release IR-2013-72, Treasury and IRS Announce That All Legal Same-Sex Marriages Will Be Recognized For Federal Tax Purposes; Ruling Provides Certainty, Benefits and Protections Under Federal Tax Law for Same-Sex Married Couples.
Personal Exemptions
The personal and dependent exemption for tax year 2015is $3,950, up $50 from 2013.
Standard Deductions
In 2015 the standard deduction for married couples filing a joint return is $12,400, and for singles and married individuals filing separately it's $6,200. For heads of household the deduction is $9,100.
The additional standard deduction for blind people and senior citizens in 2015 is $1,200 for married individuals and $1,550 for singles and heads of household.
AGI Limit for Deductible Medical Expenses
In 2015, the deduction threshold for deductible medical expenses remains at 10 percent (same as 2013, but up from 7.5 percent in 2012) of adjusted gross income (AGI); however, if either you or your spouse were age 65 or older as of December 31, 2013, the new 10 percent of AGI threshold will not take effect until 2017. In other words, the 7.5 percent threshold continues to apply for tax years 2013 to 2016 for these individuals. In addition, if you or your spouse turns age 65 in 2014, 2015, or 2016, the 7.5 percent of AGI threshold applies for that year through 2016 as well. Starting in 2017, the 10 percent of AGI threshold applies to everyone.
Income Tax Rates
Due to inflation, tax-bracket thresholds will increase for every filing status. For example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700 for a married couple filing a joint return, up from $69,000 in 2011.
Estate and Gift Taxes
The recent overhaul of estate and gift taxes means that there is an exemption of $5.12 million per individual for estate, gift and generation-skipping taxes, with a top rate of 35%. The annual exclusion for gifts remains at $13,000.
Alternative Minimum Tax (AMT)
AMT exemption amounts for 2012 have reverted to 2000 levels and will remain significantly lower than in 2011 unless Congress takes action before year-end: $33,750 for single and head of household fliers, $45,000 for married people filing jointly and for qualifying widows or widowers, and $22,500 for married people filing separately.
Marriage Penalty Relief
For 2015, the basic standard deduction for a married couple filing jointly is $11,900, up $300 from 2011.
Pease and PEP (Personal Exemption Phaseout)
Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) limitations do not apply for 2012, but like many other tax provisions, are set to expire at the end of the year.
Flexible Spending Accounts (FSA)
FSA (Flexible Spending Arrangements) are limited to $2,500 per year starting in 2013 and indexed to inflation after that and applies only to salary reduction contributions under a health FSA. However, IRS guidance issued this year recognizes that the term "taxable year" refers to the plan year of the cafeteria plan, which is typically the period during which salary reduction elections are made.
Specifically, in the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.
Further, the IRS is providing relief for certain salary reduction contributions exceeding the $2,500 limit that are due to a reasonable mistake and not willful neglect and that are corrected by the employer.
Long Term Capital Gains
In 2012, long-term gains for assets held at least one year are taxed at a flat rate of 15% for taxpayers above the 25% tax bracket. For taxpayers in lower tax brackets, the long-term capital gains rate is 0%.
Individuals - Tax Credits
Adoption Credit
In 2016, a non-refundable (only those individuals with tax liability will benefit) credit of up to $13,460 is available for qualified adoption expenses for each eligible child.
Child and Dependent Care Credit
If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses.
For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.
Child Tax Credit
The $1,000 child tax credit has been extended through 2015 as well. A portion of the credit may be refundable, which means that you can claim the amount you are owed, even if you have no tax liability for the year. The credit is phased out for those with higher incomes.
Individuals - Education Expenses
Coverdell Education Savings Account
You can contribute up to $2,000 a year to Coverdell savings accounts in 2015. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.
American Opportunity Tax Credit
For 2015, the maximum Hope Scholarship Credit that can be used to offset certain higher education expenses is $2,500, although it is phased out beginning at $160,000 adjusted gross income for joint filers and $80,000 for other filers.
Employer Provided Educational Assistance
Through 2015, you, as an employee, can exclude up to $5,250 of qualifying post-secondary and graduate education expenses that are reimbursed by your employer.
Lifetime Learning Credit
A credit of up to $2,000 is available for an unlimited number of years for certain costs of post-secondary or graduate courses or courses to acquire or improve your job skills. For 2012, The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
Student Loan Interest
For 2015, the $2,500 maximum deduction for interest paid on student loans is no longer limited to interest paid during the first 60 months of repayment. The deduction is phased out for higher-income taxpayers with modified AGI of more than $65,000 ($130,000 joint filers).
Individuals - Retirement
Contribution Limits
For 2012, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $16,500 to $17,000. For persons age 50 or older in 2012, the limit is $22,500 (up from $22,000 in 2011). Contribution limits for SIMPLE plans remain at $11,500 for persons under age 50 and $14,000 for persons age 50 or older in 2012. The maximum compensation used to determine contributions increases to $250,000.
Saver's Credit
In 2015, the AGI limit for the saver's credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $57,500 for married couples filing jointly, $43,125 for heads of household, and $28,750 for married individuals filing separately and for singles.
2015 Tax Changes for Businesses - UPDATES FOR 2017 under construction-waiting for new laws to finalize.
Whether you file as a corporation or sole proprietor here's what business owners need to know about tax changes in 2015.
Standard Mileage Rates
Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car, van, pickup or panel truck are:
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.
These optional standard mileage rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. Call if you need additional information about these and other special rules.
In addition, basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) Plan were also announced by the IRS.
If you have any questions about standard mileage rates or which driving activities you should keep track of as tax year 2015 begins, don not hesitate to call the office.
Health Care Tax Credit for Small Businesses
Small business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $50,000. The credit can be claimed in tax years 2010 through 2013 and for any two years after that. The maximum credit that can be claimed is an amount equal to 35% of premiums paid by eligible small businesses.
Credit for Hiring Qualified Veterans
The maximum credit that employers can take for hiring qualified veterans in 2015 is $9,600 per worker for employers that operate for-profit businesses, or $6,240 per worker for tax-exempt organizations. See Tax Credit for Employers Hiring Veterans This Year (below) for additional details on this tax credit.
Section 179 Expensing
In 2015 the maximum Section 179 expense deduction for equipment purchases is $139,000 ($174,000 for qualified enterprise zone property) of the first $560,000 of certain business property placed in service during the year. The bonus depreciation is 50% for qualified property that exceeds the threshold amount.
Section 179 Expensing
For 2015 the maximum Section 179 expense deduction for equipment purchases decreases to $25,000 of the first $200,000 of business property placed in service during 2014. The bonus depreciation of 50 percent is gone, as is the accelerated deduction, where businesses can expense the entire cost of qualified real property in the year of purchase.
This tax information is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call me if you have questions.
Tax Law Changes We computed the adjustments to these amounts for 2019 based on the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). The Tax Cuts and Jobs Act established this method for determining adjustments for the Earned Income Tax Credit and other tax provisions starting with tax year 2019.
Taxpayer Refund Timing –The IRS reminds taxpayers that, by law, the IRS cannot issue refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) before mid-February. While the IRS will process those returns when received, it cannot issue related refunds before mid-February. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting on Feb. 15, 2020, if they chose direct deposit and there are no other issues with the tax return.
The IRS still anticipates issuing more than nine out of 10 refunds in less than 21 days.
IRS News Releases
- IRS Publication 5318, Tax Reform: What’s New for Your Business
Publication 5318 provides information about changes to deductions, depreciation, expensing, credits, fringe benefits and other items that may affect your business tax liability and your bottom line. - IRS Publication 5307, Tax Reform: Basics for Individuals and Families
Publication 5307 provides information to help individual taxpayers understand the new law, take action - if necessary - and comply with your federal tax return filing requirements.
Please Wait on All Documents to be before filing your Income Taxes – This year when you bring your documents such as W2’s, 1099’s etc.…other than Driver’s license and social security cards…PLEASE BRING NEW HEALTH FORMS:
1095-A (Coverage through Health Insurance Marketplace)
1095-B (Health Insurance Providers (Medicaid or Medicare)
1095-C (Employer-Provided Health Insurance Offer and Coverage
Each year the Health Insurance Marketplace has an open enrollment period. The open enrollment period to purchase health care insurance for 2018 is through January 31, 2016. Contact the Marketplace at HealthCare.gov to enroll and to get information about financial assistance to purchase health care coverage for you and your family.
IRS “Where is my refund” tool. – The IRS has improved their “Where is My Refund” tool on IRS.gov. The displayed tax return statuses will include Tax Return Received, Refund Approved, and Refund Sent. It will also show the taxpayer the expected date of the refund.
The filing deadline to submit 2018 tax returns is Tuesday, April 15, 2019, rather than the traditional April 15 date.
Take a look at my website www.landinghamenterprises.com . Now is the time to get ready for this tax season, attached are some helpful tools to get you organized. Please take time to complete the 2018 Tax Organizer or Tax Interview and make your appointment soon!
Affordable Care Act Overview
What is the Affordable Care Act?
Under the Affordable Care Act, the federal government, state governments, insurers, employers, and individuals share responsibility for improving the quality and availability of health insurance coverage in the United States. The ACA reforms the existing health insurance market by prohibiting insurers from denying coverage or charging higher premiums because of an individual’s preexisting conditions.
The ACA also creates the Health Insurance Marketplace, also known as the Marketplace or the Exchange. The Marketplace is where taxpayers find information about health insurance options, purchase qualified health plans and, if eligible, obtain help paying premiums and out-of-pocket costs. A new tax credit, the premium tax credit, is available only if the taxpayer purchased a qualified health plan through the Marketplace. This credit helps eligible taxpayers pay for coverage.
Update
IRS Statement on Health Care Reporting Requirement For the upcoming 2018 filing season, the IRS will not accept electronically filed tax returns where the taxpayer does not address the health coverage requirements of the Affordable Care Act. The IRS will not accept the electronic tax return until the taxpayer indicates whether they had coverage, had an exemption or will make a shared responsibility payment. In addition, returns filed on paper that do not address the health coverage requirements may be suspended pending the receipt of additional information and any refunds may be delayed.
To avoid refund and processing delays when filing 2017 tax returns in 2018, taxpayers should indicate whether they and everyone on their return had coverage, qualified for an exemption from the coverage requirement or are making an individual shared responsibility payment. This process reflects the requirements of the ACA and the IRS’s obligation to administer the health care law.
Taxpayers remain obligated to follow the law and pay what they may owe at the point of filing. The 2018 filing season will be the first time the IRS will not accept tax returns that omit this information. After a review of our process and discussions with the National Taxpayer Advocate, the IRS has determined identifying omissions and requiring taxpayers to provide health coverage information at the point of filing makes it easier for the taxpayer to successfully file a tax return and minimizes related refund delays.
Documents individuals can gather in advance:
Proof of Insurance
Documents supporting exemptions and hardships
1095-A (Coverage through Health Insurance Marketplace)
1095-B (Health Insurance Providers (Medicaid or Medicare)
1095-C (Employer-Provided Health Insurance Offer and Coverage
Series of Yes-or-No Questions help you Determine Eligibility for the Premium Tax CreditThe premium tax credit, or PTC, is a refundable credit that helps eligible individuals and families with moderate income afford health insurance purchased through a Health Insurance Marketplace. To get this credit, you must meet certain requirements and file a tax return.
Answer the yes-or-no questions in this chart – or via accessible text – and follow the arrows to find out if you may be eligible for the premium tax credit.
People are asking…Here are commonly-asked questions that we are hearing from taxpayers and seeing on social media.
Q. What happens if I don’t file or I fail to reconcile my advance payments of the premium tax credit when I file my return?A. Failing to file a tax return or filing your return without reconciling your advance payments will delay your refund and may affect future advance credit payments. The IRS will send you a letter with instructions about what you need to do to resolve this issue, which may include submitting Forms 1095-A and 8962, so we can process your return.
Q. Does everyone need to have health insurance coverage?A. The Affordable Care Act requires you and each member of your family to have basic health coverage (called minimum essential coverage), qualify for an exemption from the requirement to have coverage, or make an individual shared responsibility payment when you file your federal income tax return. If you are not required to file a tax return and don’t want to file a return, you do not need to file a return solely to report your coverage or to claim an exemption.
Q. What are my options to receive help with filing a return and reconciling?A. Filing electronically is the easiest way to file a complete and accurate tax return as the software guides you through the filing process. Electronic filing options include free Volunteer Assistance, IRS Free File, commercial software, and professional assistance. For information about filing a return and reconciling advance credit payments, visit IRS.gov/aca.
For more questions and answers about the health care law, see the Affordable Care Act Tax Provisions Questions and Answers page.
Child-Related Tax Credits. Child-related tax credits, used by families to offset their tax burden, have been extended under ATRA. The child tax credit remains at $1,000 and is still refundable. It is phased out for married couples who earn over $110,000 and single filers who earn more than $75,000. The dependent care tax credit is equal to 35% of the first $3,000 ($6,000 for two or more) of eligible expenses for one qualifying child.
Education. The American Opportunity Tax Credit, which was scheduled to revert to the Hope Credit ($2,500), has been extended through 2017. The credit is used to offset education expenses and is worth up to $2,500.
EITC. The EITC or Earned Income Tax Credit, which benefits low to middle income working families, is extended for five years through the end of 2017. In 2015 the maximum credit is $6,242.
2015 Tax Changes for Individuals - New 2017 Updates coming soon - waiting on final tax laws from congress
Here's what individuals and families need to know about tax changes for 2015.
Update
For Same-Sex Couples and Certain Domestic Partners The following questions and answers provide information to individuals of the same sex who are lawfully married (same-sex spouses). The following questions and answers provide information to individuals of the same sex and opposite sex who are in registered domestic partnerships, civil unions, or other similar formal relationships that are not marriages under state law. These individuals are not considered as married or spouses for federal tax purposes. Additional information on these issues may be found in Notice 2013-61, Revenue Ruling 2013-17 and news release IR-2013-72, Treasury and IRS Announce That All Legal Same-Sex Marriages Will Be Recognized For Federal Tax Purposes; Ruling Provides Certainty, Benefits and Protections Under Federal Tax Law for Same-Sex Married Couples.
Personal Exemptions
The personal and dependent exemption for tax year 2015is $3,950, up $50 from 2013.
Standard Deductions
In 2015 the standard deduction for married couples filing a joint return is $12,400, and for singles and married individuals filing separately it's $6,200. For heads of household the deduction is $9,100.
The additional standard deduction for blind people and senior citizens in 2015 is $1,200 for married individuals and $1,550 for singles and heads of household.
AGI Limit for Deductible Medical Expenses
In 2015, the deduction threshold for deductible medical expenses remains at 10 percent (same as 2013, but up from 7.5 percent in 2012) of adjusted gross income (AGI); however, if either you or your spouse were age 65 or older as of December 31, 2013, the new 10 percent of AGI threshold will not take effect until 2017. In other words, the 7.5 percent threshold continues to apply for tax years 2013 to 2016 for these individuals. In addition, if you or your spouse turns age 65 in 2014, 2015, or 2016, the 7.5 percent of AGI threshold applies for that year through 2016 as well. Starting in 2017, the 10 percent of AGI threshold applies to everyone.
Income Tax Rates
Due to inflation, tax-bracket thresholds will increase for every filing status. For example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700 for a married couple filing a joint return, up from $69,000 in 2011.
Estate and Gift Taxes
The recent overhaul of estate and gift taxes means that there is an exemption of $5.12 million per individual for estate, gift and generation-skipping taxes, with a top rate of 35%. The annual exclusion for gifts remains at $13,000.
Alternative Minimum Tax (AMT)
AMT exemption amounts for 2012 have reverted to 2000 levels and will remain significantly lower than in 2011 unless Congress takes action before year-end: $33,750 for single and head of household fliers, $45,000 for married people filing jointly and for qualifying widows or widowers, and $22,500 for married people filing separately.
Marriage Penalty Relief
For 2015, the basic standard deduction for a married couple filing jointly is $11,900, up $300 from 2011.
Pease and PEP (Personal Exemption Phaseout)
Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) limitations do not apply for 2012, but like many other tax provisions, are set to expire at the end of the year.
Flexible Spending Accounts (FSA)
FSA (Flexible Spending Arrangements) are limited to $2,500 per year starting in 2013 and indexed to inflation after that and applies only to salary reduction contributions under a health FSA. However, IRS guidance issued this year recognizes that the term "taxable year" refers to the plan year of the cafeteria plan, which is typically the period during which salary reduction elections are made.
Specifically, in the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.
Further, the IRS is providing relief for certain salary reduction contributions exceeding the $2,500 limit that are due to a reasonable mistake and not willful neglect and that are corrected by the employer.
Long Term Capital Gains
In 2012, long-term gains for assets held at least one year are taxed at a flat rate of 15% for taxpayers above the 25% tax bracket. For taxpayers in lower tax brackets, the long-term capital gains rate is 0%.
Individuals - Tax Credits
Adoption Credit
In 2016, a non-refundable (only those individuals with tax liability will benefit) credit of up to $13,460 is available for qualified adoption expenses for each eligible child.
Child and Dependent Care Credit
If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses.
For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.
Child Tax Credit
The $1,000 child tax credit has been extended through 2015 as well. A portion of the credit may be refundable, which means that you can claim the amount you are owed, even if you have no tax liability for the year. The credit is phased out for those with higher incomes.
Individuals - Education Expenses
Coverdell Education Savings Account
You can contribute up to $2,000 a year to Coverdell savings accounts in 2015. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.
American Opportunity Tax Credit
For 2015, the maximum Hope Scholarship Credit that can be used to offset certain higher education expenses is $2,500, although it is phased out beginning at $160,000 adjusted gross income for joint filers and $80,000 for other filers.
Employer Provided Educational Assistance
Through 2015, you, as an employee, can exclude up to $5,250 of qualifying post-secondary and graduate education expenses that are reimbursed by your employer.
Lifetime Learning Credit
A credit of up to $2,000 is available for an unlimited number of years for certain costs of post-secondary or graduate courses or courses to acquire or improve your job skills. For 2012, The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
Student Loan Interest
For 2015, the $2,500 maximum deduction for interest paid on student loans is no longer limited to interest paid during the first 60 months of repayment. The deduction is phased out for higher-income taxpayers with modified AGI of more than $65,000 ($130,000 joint filers).
Individuals - Retirement
Contribution Limits
For 2012, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $16,500 to $17,000. For persons age 50 or older in 2012, the limit is $22,500 (up from $22,000 in 2011). Contribution limits for SIMPLE plans remain at $11,500 for persons under age 50 and $14,000 for persons age 50 or older in 2012. The maximum compensation used to determine contributions increases to $250,000.
Saver's Credit
In 2015, the AGI limit for the saver's credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $57,500 for married couples filing jointly, $43,125 for heads of household, and $28,750 for married individuals filing separately and for singles.
2015 Tax Changes for Businesses - UPDATES FOR 2017 under construction-waiting for new laws to finalize.
Whether you file as a corporation or sole proprietor here's what business owners need to know about tax changes in 2015.
Standard Mileage Rates
Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car, van, pickup or panel truck are:
- 54 cents per mile for business miles driven, down from 57.5 cents for 2015
- 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
- 14 cents per mile driven in service of charitable organizations
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.
These optional standard mileage rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. Call if you need additional information about these and other special rules.
In addition, basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) Plan were also announced by the IRS.
If you have any questions about standard mileage rates or which driving activities you should keep track of as tax year 2015 begins, don not hesitate to call the office.
Health Care Tax Credit for Small Businesses
Small business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $50,000. The credit can be claimed in tax years 2010 through 2013 and for any two years after that. The maximum credit that can be claimed is an amount equal to 35% of premiums paid by eligible small businesses.
Credit for Hiring Qualified Veterans
The maximum credit that employers can take for hiring qualified veterans in 2015 is $9,600 per worker for employers that operate for-profit businesses, or $6,240 per worker for tax-exempt organizations. See Tax Credit for Employers Hiring Veterans This Year (below) for additional details on this tax credit.
Section 179 Expensing
In 2015 the maximum Section 179 expense deduction for equipment purchases is $139,000 ($174,000 for qualified enterprise zone property) of the first $560,000 of certain business property placed in service during the year. The bonus depreciation is 50% for qualified property that exceeds the threshold amount.
Section 179 Expensing
For 2015 the maximum Section 179 expense deduction for equipment purchases decreases to $25,000 of the first $200,000 of business property placed in service during 2014. The bonus depreciation of 50 percent is gone, as is the accelerated deduction, where businesses can expense the entire cost of qualified real property in the year of purchase.
This tax information is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call me if you have questions.
