THOMSON REUTERS PRESENTATION TEMPLATE...• Costs of connecting/disconnecting utilities • Travel...

Surface Transportation Veterans Health Care Choice

Improvement Act of 2015

Presented by: Tony Johnson, CPA

Copyright 2015 Thomson Reuters All Rights Reserved.

2

Surface Transportation Act Signed by President July 31, 2015 Tax return due dates:

Entity 2015 2016 Extension Individuals 4/15* 4/15 10/15

Partnerships 4/15 3/15 9/15 S Corps 3/15 3/15 9/15 C Corps 3/15 4/15 9/15 1041 4/15 4/15 9/30 5500 8/31 8/31 11/15 FinCEN 114 6/30 4/15 10/15

*Since 4/15/17 falls on a weekend returns are due on 4/18/16 except for ME and MA which are 4/19/17

3

Surface Transportation Act Signed by President July 31, 2015 • For estate tax returns filed after 7/31/15

– FMV (Step up basis) of each property must be reported to IRS and to each beneficiary

• Additional reporting on form 1098 after 12/31/16

– Outstanding balance at beginning of year – Mortgage origination date – Address of property secured by mortgage

Adjustments to Income So Much Better Than Deductions on

Schedule A



5

Adjustments to Income What’s New This Year

271

6

Educator Expenses (Expired 12/31/14) Deduct up to $250 ($500 if both husband and wife

qualify) Unreimbursed expenses for: • Books • Supplies • Computer equipment and software • Other items used in the classroom Must work 900 hours per year as: • Teachers • Instructors • counselors • principal and aides Available only for kindergarten through grade 12

271

7

Certain Expenses of Reservists Deduct as adjustment rather than itemized

deduction cost of travel to perform reserve duty Must travel more than 100 miles from home Limited to: • Federal per diem rate for lodging, meals and

incidentals • Standard mileage rate plus parking, fees and tolls Excess deducted on Schedule A subject to 2% Applies to: Reserves in Army, Navy, Marines, Air Force, Coast Guard, Air National Guard, Reserve Corp of Public Health Service

8

Certain Performing Artists Deduct as adjustment to income rather than

itemized employee business expenses Must meet all following: • Perform services as employee for at least two

employers during the year • Receive at least $200 from each of any two • Expenses must exceed 10% of related income • AGI is not more than $16,000 before this

deduction

9

Certain Government Officials Deduct as adjustment rather than itemized

employee business expenses even if not itemizing

Must be a state or local government official employed in whole or in part on a fee basis

10

Health Savings Accounts Deduct medical expenses as an adjustment to

income rather than medical expense on Sch A Deduct expenses when contributed (in advance) Interest, dividends and other earnings are tax free Distributions are tax free as long as they are used

to pay for medical expenses

This is better than any IRA Many taxpayers use this as a supplement to a

retirement plan

272

11

Health Savings Accounts To qualify for HSA: You must have a High Deductible Health Plan

(HDHP) by 1st day of last month of year No other health coverage (there are exceptions) Not enrolled in Medicare Cannot be claimed as dependent by someone else

272

12

Health Savings Accounts High Deductible Health Plan (HDHP): Self only Family Minimum deductible $1,300 $2,600 Maximum out-of-pocket $6,450 $12,900 Above numbers are for 2015. They are indexed for

inflation

272

13

Health Savings Accounts Maximum contribution to HSA: Self only Family Under age 55 $3,350 $6,650 Age 55 or older $4,350 $7,650

There is no joint HSA but each spouse can have their own

Contributions are reduced proportionately for less than 12 months of coverage

Above numbers are for 2015. They are indexed for inflation

273

14

Health Savings Accounts Other pointers: Contributions can be made by April 15 of following

year There could be recapture if coverage is not

maintained for 12 months Excess contributions if not withdrawn by due date

of tax return are subject to 6% penalty

273

15

Health Savings Accounts Tax-free distributions include: • Any medical and dental expense that would be

deducted on Sch A • Long-term care insurance premiums • COBRA insurance premiums • Insurance premiums while receiving

unemployment • Medicare and other insurance if 65 or older Following are not eligible: • Expenses incurred prior to establishing HSA • Health insurance premiums (other than above)

274

16

Health Savings Accounts Balance in an HSA: There is no requirement to make distributions Distributions other than for medical are taxable An additional tax of 20% applies The additional 20% does not apply at age 65 or at

death A spouse can inherit and continue an HSA For other beneficiaries the HSA balance becomes

taxable at death

274

17

Moving Expenses

Deductible if:

• Move is closely related to start of work (within 1 year)

• You meet the distance test

• You meet the time test

Different rules apply to retirees, survivors and members of armed forces

275

18

Moving Expenses – Distance Test

1. Distance from old home to old job 10

2. Distance from old home to new job 65

Difference must be at least 50 miles or greater

Note: New home does not feature in this calculation

275

19

Moving Expenses – Distance Test

20

Moving Expenses –Time Test Employees - Must be employed 39 weeks of first year Self-employed - Must be self-employed 78 weeks of first 2 years It is possible to combine employment with self-employment Exceptions apply for death, disability, transfer or loss of employment You can take the deduction before the end of the test period, but failure to pass the test will require an amended return

276

21

Moving Expenses –Time Test

22

Moving Expenses – Deductible Expenses

Following are deductible: • Cost of moving household goods and stuff • Storage expenses within 30 days • Costs of connecting/disconnecting utilities • Travel expenses for family (airfare, train etc.) • Driving 23 ½ cents or actual out of pocket • Lodging including arrival date and one day at

old location

277

23

Moving Expenses – Deductible Expenses

Following are not deductible: • Meals while you move • Costs of selling old home or buying new home • Temporary living expenses at new location • Loss on sale of old home

24

Moving Expenses – Employer Reimbursement

Accountable plan:

Reimbursements of deductible items is not included as taxable income on W2

Instead it is reported in box 12, with code “P”

Deductible expenses in excess of reimbursements are deductible on Form 3903

278

25


Nonaccountable plan:

Reimbursements are included as taxable wages subject to withholding

• Advances not returned to employer or excess reimbursements

• Reimbursement for nondeductible items (eg. meals)

278

26


27

Self-Employment Tax Deduct as an adjustment to income the employer-equivalent portion of SE tax

Generally 50% of SE tax

Deduction is calculated on schedule SE

28

Self-Employed Health Insurance Deduct as an adjustment to income rather than on Schedule A Premiums paid for yourself, spouse, dependents, children under 27 who are not dependents • Medical insurance • Dental insurance • Qualified long-term care • Medicare premiums

279

29

Self-Employed Health Insurance Not available for any month you, spouse or dependents were eligible for subsidized plan through employer of husband or wife

No double dipping – amounts claimed as an adjustment to income cannot be deducted on Schedule A

One of following must be true: • Self-employed and had a net profit on Sch C or F • Partner with net SE earnings on K-1 • S corp stockholder with health insurance included

in W-2 wages

279

30

Medicare Qualifies as SE H Insurance Chief Counsel Advice 201228037

• All Medicare Parts (not just Part B) are insurance

• Can be used to compute deduction for SE H. Ins

• This extends to coverage for a spouse, dependent or child (under age 27)

281

31

Medicare Qualifies as SE H Insurance Chief Counsel Advice 201228037 Cont’d

• M’care premiums allowed also to partners

• Partnership may pay premiums directly

• If paid by partner must be reimbursed by partnership

• Must be reported as guaranteed payments on K1

• Costs are deducted on 1065

281

32

Medicare Qualifies as SE H Insurance Chief Counsel Advice 201228037 Cont’d

• M’care premiums allowed also to 2% Shareholders

• S corporation may pay premiums directly

• If paid by shareholder must be reimbursed by S Corporation

• Must be reported as wages in the W2

• Costs are deducted on 1120S

281

33

We Have Enjoyed Three Popular Plans

• Employer provided health insurance Employer pays directly to Insurance Co

• Health Reimbursement Accounts (HRA) Employer reimburses actual medical costs

• Employer Payment Plans (EPP) Employer pays employee who buys insurance

34

Employer Provided Health Insurance

These plans continue to be permissible as long as they meet the requirements of the Affordable Care Act

35

Health Reimbursement Accounts

• Employer reimburses and deducts medical expense

• Not subject to income tax or employment tax

• Employers may restrict the type of expenses that are reimbursed

• These are group health plans where the employer will reimburse up to a certain amount

: The last point is at odds with the ACA which says plans cannot impose annual or lifetime limits

36

Employer Payment Plans

• Revenue Ruling 61-146 : Amounts paid directly or to reimburse an employee for health insurance premiums are excludable from the employee’s income under section 106.

• Many employers have been relying on this provision for years by either directly paying the insurance premiums or by reimbursing the employees. The employee has received a tax-free benefit while the employer has enjoyed a deduction.

• Employers were hoping to extend this provision with Health care reform. In essence, by providing funds for employees to use in purchasing their own insurance, employers hoped to avoid more costly insurance and penalties.

37

IRS Notice 2013-54—Overview

• This notice affects HRAs, and EPPs • These new rules were effective for plan years

beginning on or after 1/1/14. • Employers need to make certain their HRAs

comply • Employer Payment Plans must be eliminated • Failure to comply with these rules can result in an

excise tax (fine) of a $100 per person/per day

38

IRS Notice 2013-54

• The market reforms do not apply to group health plans that have fewer than two employees or that provide “excepted benefits” (See discussion on EPPs later)

Observation: This means that one employee section 105 plans are still fine

• Exception: A standalone HRA that is for retirees-only is allowed since the plan would have fewer than two current employees

• Excepted benefits include accident-only coverage, disability income, certain limited dental and vision benefits, long-term care, and certain FSAs

39

IRS Notice 2013-54 (Continued)

• The two key market reforms that must be included in group health plans are:

1. The plan cannot place an annual dollar limit on “essential health benefits,” and

2. Non-grandfathered group health plans cannot impose any cost-sharing requirements on certain preventative services.

• Generally, a standalone HRA will fail to satisfy the above.

40

DOL FAQ 11/14

My employer offers employees cash to reimburse the purchase of an individual market policy. Does this arrangement comply with the market reforms? No. If the employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the employer's payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee

41

DOL FAQ 11/14 (Continued)

A vendor markets a product to employers claiming that

employers can cancel their group policies, set up a Section 105 reimbursement plan that works with health insurance brokers or agents to help employees select individual insurance policies, and allow eligible employees to access the premium tax credits for Marketplace coverage. Question: Is this permissible?

42

DOL FAQ 11/14 (Continued)

Answer: No. The Departments have been informed that

some vendors are marketing such products. However, these arrangements are problematic for several reasons. First, the arrangements described in this Q3 are themselves group health plans, and therefore employees participating in such arrangements are ineligible for premium tax credits (or cost-sharing reductions) for Marketplace coverage. The mere fact that the employer does not get involved with an employee's individual selection or purchase of an individual health insurance policy does not prevent the arrangement from being a group health plan.

43

IRS Notice 2015-17

• Purpose:

1. To reiterate conclusion of previous guidance that EPP are group Health Plans that are not allowed

2. Provide relief

3. Provide additional guidance

• Note previous postings: • DOL FAQ 1/24/13 • IRS Notice 2013-54 • DOL Technical Release 2013-03 • IRS FAQ • DOL FAQ 11/6/14

44


• The HHS and DOL have agreed with this Notice

• Further notices are coming regarding EPPs and HRAs

• This notice is intended to be read in conjunction with IRS Notice 2013-54

• The government thought we needed additional time to adopt a group health plan or choose an alternative

• The government believes the SHOP will address many of our concerns but the market is still in transition

45


Question 1: Is an EPP subject to the 4980D penalty ?

Answer: Yes, but there is relief:

- No penalty for 2014 and from January 1, 2015 to June 30, 2015

- Applies to EPPs that pay or reimburse for individual health plans or Medicare part B or part D premiums

- Must not be an Applicable Large Employer (ALE) (See definition on the next slide)

- Employers are relieved from filing the 8928 Excise form

- This relief does not extend to non compliant HRAs

- After June 30,2015 there may be penalties

46

IRS Notice 2015-17 (Continued) • Applicable Large Employer:

• Generally has at least 50 full-time equivalent employees during the preceding year. [4980H(c)(2)]

• For 2014 and 2015, an employer can choose a measurement period of at least six consecutive calendar months during 2013 for 2014, and 2014 for 2015

47

IRS Notice 2015-17 (Continued) 2% S Shareholders:

• No penalty will be imposed on any S corporation that either reimburses or pays for insurance of a 2% S shareholder through at least 12/31/15.

• The S corporation does not have to file the excise tax form 8928 with respect to the 2 % S shareholder unless and until the IRS says differently

• This extended relief does not apply to the employees of the S corporation

48


• The S corporation can continue to rely on IRS Notice 2008-1 which allows an above- the-line-deduction in computing AGI

• To the extent the 2 % S shareholder is allowed a Premium Assistance Credit, the above the-line-deduction must be adjusted pursuant to Rev. Proc. 2014-41

49


• If an employee is covered under a non self-only coverage plan (like a family plan) and another employee is covered under the same plan, then that arrangement is deemed to cover just one employee. This is very good.

• However, if the S corporation has more than one reimbursement plan (including 2 % S shareholders), then all of the plans are treated as one plan covering more than one employee, and this means penalties.

50

IRS Notice 2015-17 (Continued) Question 4: If an employer increases an employee’s compensation, but does not condition the payment of the additional compensation on the purchase of health coverage (or otherwise endorse a particular policy, form, or issuer of health insurance), is this arrangement an employer payment plan? Answer: No.

51

In Summary • Effective January 1, 2014 Most HRAs and EPPs

are no longer allowed (There are exceptions) • Penalties can be imposed $100/day per

employee effective 1/1/14 for HRA, effective 7/1/15 for EPP

• Penalties can be avoided by treating all payments as wages (subject to p/r tax)

• Additional wages must not be conditional on employee buying insurance

• Caution when converting to wages all in 4th quarter

52

Exception – Both HRA and EPP • No penalty if fewer than 2 employees • Husband, wife and children covered under a

family plan are considered one employee

53

Exception - HRA HRAs are permitted providing: • No discrimination • No limits on reimbursement of essential health

benefits • No cost sharing by employees for preventative

services These requirements are not acceptable to most employers

54

Exception – 2% S Corp Shareholders • If shareholder is the only employee no penalty • If all employees are shareholders no penalty

until after 12/31/15 (possibly later) • If even one employee is not a shareholder

penalty applies after 6/30/15 • Benefits must still be included in W2 Box 1 only

(not subject to FICA) Note the above applies only to HRA and EPP

55

Early Savings Withdrawal Penalty Early withdrawal of CDs may result in a penalty

Include total interest in income on Schedule B

Deduct penalty as adjustment to income even it exceeds the interest income

Note: The interest income should be reported in box 1 on 1099-INT and penalty should be reported in Box 2

285

Filing Status



57

Same Sex Marriages (SSM) Defense of Marriage Act (DOMA) - marriage is a

union between one man and one woman Struck down by Supreme Court 6/26/2013 (only

for States recognizing same sex marriages)

Effective 9/5/13 IRS issued Rev Rul 2013-17 • Recognizing SSM based on State of celebration

regardless of residence • IRS does not recognize Registered Domestic

Partnerships (RDP) On 6/26/15 the Supreme Court declared SSM legal nationwide

292

58

Same Sex Couples Filing status issues: Same sex married (SSM) • Must file joint or MFS federal returns • Potential to file amended returns for open years Registered Domestic Partners (RDP) • Must file single or HOH for federal • In some States must file married or MFS • Community property rules apply

– The taxpayer must report one-half of the community income (PLR 201021048)

– New Form 8958

292

59

293

60

Same Sex Couples Other tax issues: Potential refunds for employees (Any open year) • Benefit from joint rates and brackets • Exclude employer provided health insurance • Exclude employer sponsored cafeteria plans • Recover FICA and M’care tax on above

– File Form 843 Write “Windsor Claim” across top

Potential adjustment for employers • For current year only for amounts of withholding

tax repaid to employee

Kiddie Tax



62

Kiddie Tax - Background

•First Introduced with Tax Reform in 1986

•To close a loophole

•Stop shifting income between family members

•Tax children at parent’s tax rate

301

63

History of Kiddie Tax (Based on age at midnight - Dec 31)

•TRA 1986 Children under 14

•TIPRA 2006 Children under 18

•SBA 2008 Children under 19 also

Students under 24

301

64

Application of Kiddie Tax

•Applies to unearned (Investment) Income

•Exemption: 2007 $1,700 2008 $1,800 2009-2012 $1,900 2013 -2014 $2,000 2015 $2,100

•At least one living parent

•Not filing joint return

302

65

Application of Kiddie Tax

Investment Income includes:

Taxable interest Ordinary dividends Capital gains Rents, Royalties etc. Taxable Social Security Pensions and annuity income Income from a trust

66

No Kiddie Tax if

•Neither parent is alive

•Child is married filing jointly

•Child earned income exceeds half support

67

Support Defined

•Same as to determine dependency

•Includes: Food, lodging, clothing, educational,

medical, dental, recreation, transportation, other necessities

•Does not include scholarships

68

Reporting Kiddie Tax

•Form 8615 – Report on child’s tax return or

•Form 8814 - Election to report on parents’ return

302

69

Form 8814 Parent’s Return

Only if:

•Child’s income is interest and dividends only

•Child’s gross income < $10,500

•Child had no withholding or estimated payments

303

70

Form 8814 Parent’s Return

With Form 8814 you cannot take following: • Penalty on early savings withdrawal • Itemized deductions of child

Increased AGI for parents can cause: • Phase out of many items • More Social Security Taxed Figure tax both ways

71

Planning to Avoid Kiddie Tax

•Use college credits on child’s tax return

•Increase earned income

•Use 529 Plans

•Postpone transferring income to children until old enough

•Rebalance investments of children

•Marry off the kids (Just kidding)

Divorce



73

Divorce

•Decide who is your client – Husband – Wife – Both – Neither

•Avoid conflicts of interest

74

Alimony

• Deductible to party making payment

• Taxable to party receiving payment

• Written divorce/separation agreement

• Paid in Cash, check, money order

• Must terminate on death of Ex spouse

• Must not live together

• Must not look like child support

• No agreement voiding alimony treatment

• Parties must not file joint return

Beware of Alimony Recapture

310

75

Child Support

Not deductible to party making payment

Not taxable to party receiving payment

•Usually designated as child support in divorce agreement

•Reduced or eliminated on contingency associated with child indicates child support eg

–Becoming employed –Dying –Leaving the household –Leaving school –Marrying Reaching certain age –Reaching certain income level

312

76

Property Settlements

•General Rule – No gain/loss – Same basis

•Redemption of Stock in closely held corp – May be taxed to H/W per agreement

•Debt to acquire residence is acquisition

•No depreciation recapture

•Sec 179 recapture if business use drops

•Passive losses are not released - increase basis

315

77

Income Allocation •Community Property States

– AZ,CA,ID,LA,NV,NM,TX,WA,WI – Confusing, Not always equitable – All community income divided between

spouses until divorce is final – Even if all received/enjoyed by one spouse

•Equitable distribution States – All others – Earned income based on who earns it – Income from property based on who owns it

316

78

Estimated Tax Payments

•Allocate in any manner agreed upon

•No agreement – Community prop states – divide equally – Other states – divide based on tax liability

•He/She who files first usually has the upper hand

320

79

Allocating Tax Carryforwards •Capital loss - Based on each spouse’s loss

•Charitable contributions – Based on had they filed separate returns

•NOL – Based on spouse’s separate income

•AMT Credit – No published authority

•Business credit – Follow the property

•Investment interest – Any reasonable method

•Passive losses are not released – spouse who gets the property increases basis

321

80

Dependent of Both Parents

In the case of divorce children may be dependents of both parents for purposes of:

•Sec 105(b) – Medical Reimbursements

•Sec 132(h)(2)(A) – Fringe benefits

•Sec 213(d)(5) – Deductible medical exp

•Sec 220(d)(2) – Medical savings account

•Sec 223(d)(2) – Health savings account

•Rev Proc 2008-48 (8/21/08)

Foreign Earnings and Taxes



82

What’s New Next Year

FBAR filing date for FinCEN 114 changed from June 30, 2017 to April 15, 2017

For tax years beginning after 2015

Extensions are available to October 15, 20167

Still filed separate from tax return

IRS has authority to waive penalty for first time filers

323

83

What Does FBAR Stand For?

Film Bulk Acoustic Resonator

Florida Business Assessment Report

First Boring Accountants Reunion

Foreign Bank Account Reporting

Essentially forms which must be filed with the Federal Government

323

84

What Does FinCEN Stand For?

Financial Center

Finish College Education Now

Financial Center Eliminating Narcotics

Financial Crimes Enforcement Network

The mission of FinCEN is to safeguard the financial system from illicit use, to combat money laundering and to promote national security

323

85

What Does BSA Stand For?

Barely Still Alive

Bright Smart Accountants

British Small Arms

Bank Secrecy Act

BSA E-Filing System supports electronic filing of forms through a FinCEN secure website

323

86

Abatement of Penalty

IRS will not impose a penalty for late filing providing:

• Include a statement why filing late

• File all delinquent FBARs electronically

• Select reason for filing late on cover page

• If unable to file electronically contact 1-800-949-2372 for help

332

87

Canadian Retirement Plans

RRSP – Registered retirement savings plans

RRIF – Registered retirement income funds

Now automatically qualify for tax deferral same as IRAs and 401(k) plans. Rev Proc. 2014-97

Previously taxpayers had to file Form 8891 each year to get tax deferral. No longer required for any year past or present.

Special Filing Situations



89

Gambling Losses up to Winnings • Winnings are reported on form 1040 Line 21

• Losses up to that amount are allowed on Sch A

• You cannot net losses against winnings for different days or different types of wager – You can look at net activity on a day by day basis for

same type of play – for example slot machines on same day use net winnings or loss for the day

• Diary of winnings and losses is essential – Date and type of wager – Name and address of location – Name of other persons present – Amount of winnings and losses

351

90

How Gambling Losses Can Create Tax

• Married Couple with a pension of $20,000, Social Security Benefits of $20,000, Standard Deduction, Zero Tax

Pension 20,000 Social Security $20,000 0 Standard Deduction 12,600 Schedule A - $5,000 Exemption 8,000 Taxable Income 0 Tax 0

91

How Gambling Losses Can Create Tax

• Married Couple with a pension of $20,000, Social Security Benefits of $20,000, Gambling winnings of $30,000, Gambling Loss of $40,000

• Net gambling loss of $10,000 creates tax of $2,678

Gambling winnings 30,000 Pension 20,000 20,000 Social Security $20,000 0 17,000 Standard deduction 12,600 Schedule A $5,000+30,000 35,000

Exemption 8,000 8,000 Taxable income 0 24,000 Tax 0 2,678

Schedule A



93

What’s Changed Updated numbers for: • Standard deductions • Long-term care premiums • Mileage rates Increased floor for medical expenses (in 2013) Return of phase-out's (in 2014) Expired after 2014 • Optional sales tax deduction • Deduction for mortgage insurance premiums • Direct donations from IRA

375

94

Standard Deductions

Filing Status 2013 2014 2015 Single & MFS 6,100 6,200 6,300

Head of Household 8,950 9,100 9,250

MFJ & QW 12,200 12,400 12,600

Dependent * 1,000 1,000 1,050

*Or earned income plus $350 up to single standard deduction

375

95

Additions to Standard Deduction for Elderly/Blind

Filing Status 2013 2014 2015 Single 1,450 1,500 1,550

MFJ & QW 1,150 1,200 1,250

375

96

Return of the Phase-outs Limitation of itemized deductions starting after 2012 3% of excess of adjusted gross income in excess of new thresholds: 2014 2015

• Joint $305,050 $309,900 • Head of Household 279,650 284,050 • Single 254,200 258,250 • Married filing separate 152,525 154,950

Adjusted for inflation annually Reduction not to exceed 80% of Sch A Medical, investment interest, casualty and gambling losses not reduced by limitation

375

97

The Art of Bunching - Medical Expenses No planning

Mr. and Mrs. GoodHealth have AGI of $100,000 and medical expenses of $9,000 each year as follows:

Over this period no deductions are allowed

2014 2015 2016 Total Medical Exp 9,000 9,000 9,000 27,000 Threshold 10,000 10,000 10,000 30,000 Deductible 0 0 0 0

98

The Art of Bunching - Medical Expenses With Planning

Mr. and Mrs. GoodHealth were able to defer some expenses normally paid in 2014 until 2015 and to speed up expenses normally paid in 2016:

They have salvaged a deduction of $9,000 without incurring any additional expense. Assuming a 25% tax bracket the tax savings are $2,250

2014 2015 2016 Total Medical Exp 4,000 19,000 4,000 27,000 Threshold 10,000 10,000 10,000 30,000 Deductible 0 9,000 0 9,000

99

The Art of Bunching – To Itemize No Planning

Over this period no deductions are allowed

2014 2015 2016 Total

Medical Exp 9,000 9,000 9,000 27,000

Threshold 10,000 10,000 10,000 30,000

Deductible 0 0 0 0

Property tax 6,000 6,000 6,000 18,000

Charity 3,000 3,000 3,000 9,000

Total 9,000 9,000 9,000 21,000

Standard Ded 12,400 12,600 12,800 37,800

100

The Art of Bunching – To Itemize With Planning

Salvaged deductions of $14,400 for savings of $3,600 assuming 25% tax bracket

2014 2015 2016 Total Medical Exp 4,000 19,000 4,000 27,000

Threshold 10,000 10,000 10,000 30,000

Deductible 0 9,000 0 0

Property tax 6,000 9,000 3,000 18,000

Charity 0 9,000 0 3,000

Total 6,000 27,000 3,000 30,000

Standard Ded 12,400 12,600 12,800 37,800

101

Medical Expenses

Before 2013-Everyone - must exceed 7.5% of AGI

After 2012 - Under 65 - must exceed 10% of AGI

After 2015 - Everyone - must exceed 10% of AGI

Note: if either spouse is over 65 use 7.5% until 2016

376

102

Capital Expenditures

• Deduct cost of special equipment or home improvement

• Reduced by increase in FMV of property

• Primarily for and directly related to medical care

Examples: widening hallways, railings, elevators, ramps, modifying bathroom and kitchen

377

103

Health Insurance – Schedule A Health insurance includes: • Medical insurance • Dental insurance • Medicare Part A • Medicare Part B • Medicare Part D

Reduced by: • SE health ins deduction • Amounts paid with pretax dollars

378

104

Medical Expenses - Dependents

• Taxpayer

• Spouse

• Dependents claimed on tax return

• Children of divorced/separated parents not claimed on tax return

• Any person who could be claimed except for income over $3,900 or filing joint return

378

105

Long-Term Care Maximum

Age 2013 2014 2015 40 and under 360 370 380

41-50 680 700 710

51-60 1,360 1,400 1,430

61-70 3,640 3,720 3,800

71 and older 4,550 4,660 4,750

379

106

Medical Test The following are deductible (True or False) • Psychiatrists, and Psychologists • Acupuncture and Chiropractic • Programs to stop smoking • Weight loss programs • Diet foods • Treatment for chemical dependency • Cosmetic surgery • Orthodontist • Cost of abortions • Sex change costs • Imported drugs not approved by FDA • Nicotine gum and patches • Funeral, burial or cremation costs

True True True True False True False True True

False False False

Maybe

107

Homes for Elderly

• Deduct costs that relate to medical care

• Including lump sum or monthly payments

Use statement from retirement home to provide amount allocable to medical care

108

State and Local Sales Taxes - Expired

Deduct only if greater than state income tax • Use actual expenses or • Optional sales tax tables • Add to optional tables sales tax on:

– Autos – Boats – Airplanes – Homes purchased/substantial improvements – Do not add tax on furniture, appliances etc.

• Do not include items used in trade or business Could this be extended retroactively to 1/1/15

381

109

Mortgage Ins Premiums- Expired May be treated as mortgage interest Must be: • In connection with home acquisition debt • Insurance contract issued after 2006 Deduction phases out for AGI in following ranges: Married/Single $100,000 - $109,000 Married filing separate $50,000 - $54,500 Note unless extended by congress this deduction expired at the end of 2014

383

110

Tax Free Transfer from IRA to Charity Made retroactive to 1/1/14 expired 12/31/14 Exclude from income distributions from an IRA directly to charity: • Reduces AGI • Available even if taking standard deduction • Not limited to 50% of AGI • Must be 70 ½ • Maximum allowed $100,000 Can we expect this again for 2015?

111

Miscellaneous Deductions Subject to 2% of AGI

• Unreimbursed employee expenses • Expenses to

– produce/collect income – Manage property for producing income – Determine or contest tax

• Appraisals for casualty or charitable • Depreciation (Home office furniture and equip) • Legal fees

– Tax advice but not drafting a will – To collect alimony but not to defend against it – Related to keeping a job or business

• Hobby expenses • IRA/Keogh fees • Repayment of SS for prior year if less than $3,000

402

112

Miscellaneous Deductions

Not subject to 2% of AGI

• Impairment related work expenses • Certain casualty and theft losses • Gambling losses to the extent of winnings • Federal estate tax on income in resect of a

decedent • Repayment of SS for prior year if more than

$3,000

403

113

What to Deduct Elsewhere Health Insurance Adjustments to income

105 Plan Schedule C

Property Tax Office in home

Mortgage Interest Office in home

Charity Advertising

Charity Direct from IRA

Tax preparation fee Schedule C/E

Employee bus exp. Accountable plan

Casualties, Disasters, Thefts



THOMSON REUTERS PRESENTATION TEMPLATE...• Costs of connecting/disconnecting utilities • Travel...

Documents

Transcript of THOMSON REUTERS PRESENTATION TEMPLATE...• Costs of connecting/disconnecting utilities • Travel...