The credits for education are based on eligible expenses paid in the current year for academic periods beginning in the current year and/or the first three months of the following year. In a recent case, a student paid tuition of $5,895 in December 2011 for the spring 2012 semester that started February 1.
Archive for Harold Goedde
Mortgage Broker – No Self Employment Tax.
A broker who managed mortgages received a fee when he sold his house used as a personal residence. He reported the commission as self employment income but the IRS said he has to pay self- employment tax on the commission. The Tax Court overruled the IRS stating that the commission was not subject to selfemployment tax because the sale relates to a personal transaction [Guarino, TC Sum. Op. 201612].
Deduction Denied for Amounts Paid to Children. Read more
American Opportunity Credit The tax law passed by Congress in December 2015 extended many provisions retroactive to January 1, 2015 and made many of them permanent. Taxpayers who qualify for the deductions and credits but did not take advantage of them on their 2015 return, can file an amended return to use them. They should also be aware of the ones made permanent and use them in preparing future returns.This article discusses the major provisions to help taxpayers save taxes.
(Some information was reported by The Kiplinger Tax Letter (December 2015)
Timing of year-end contributions: Contributions made by check are deductible in 2015 if the check is mailed by year-end. If payment is made by bank credit card, it is deductible in 2015 if the charge is made by year-end. It doesn’t matter hen the credit card payment is made. If the donation is made with a retail store credit card, the deduction cannot be taken until the card is paid, even though it was charged in
Donations of securities and other property:
This is an excellent way to make a contribution without paying cash. Taxpayers can deduct the fair value of the securities on the date of the gift. Donating appreciated securities Read more
1. Earned income (EITC).
Taxpayers with no children it is $503, with one child $3,359, two qualifying children $5,548, three qualifying children $6,342 but are subject to AGI phaseouts. The recent tax law makes permanent the increase of $5,000 in the phaseout amount for joint filers scheduled to expire after 2017. The law also makes permanent the increased 45% credit percentage for taxpayers with three or more qualifying children. Under prior law, both increases had been available only through 2017. It also makes permanent the reduced earned income threshold of $3,000. The law makes the following provisions permanent:
(a) Taxpayer Identification Number (TIN) Required. The EITC is denied with respect to any taxable year for which the taxpayer has a TIN that has been issued after the due date for filing the return, including extensions. Read more
The basic amount for single taxpayers is $6,300, married filing joint and surviving spouse $12,600, married filing separate $6,300 (zero if one spouse itemizes because on separate returns both spouses must either itemize or use the standard deduction), and head of household $9,250. The additional standard deduction is $1,550 for singles and head of household, $1,250 for married filing joint and surviving spouse. The standard deduction for those claimed as a dependent on another return can’t exceed the lesser of (1) $6,300 or (2) the greater of $1,050 plus earned income. Read more
DEFERRED RETIREMENT PLANS LIMITATION
1. 401(K). The maximum contribution is $18,000 but increases to $24,000 if age 50 and older (up to $6,000 in catch-up contributions).
2. Defined Benefit Plans. The maximum benefit amount is $210,000.
3. Defined contribution plan [e.g 401(k), 403(b)) and 457]. The maximum contribution is the lesser of $53,000 or 100% of compensation.
4. Regular and Roth IRA. The maximum contribution is $5,500 plus a $1,000 catch up contribution if age 50 and older. Taxpayer must have earned income. Read more
1. Employers subject to the heath care mandate.
All companies with 50 or more fulltime equivalent employees are required to offer health care benefits to fulltime employees and their dependents. If not provided, they are subject to a fine (see below). The insurance plan must provide “minimum value” (plan pays at least 60% of the cost of covered health benefits and provide substantial coverage of inpatient hospital and doctors services).
2. Fines for non compliance: The amount is the lesser of:
(a) $3,000 times the number of fulltime employees, in excess of 30, who buy a federally subsidized policy through a state exchange and receive a premium assistance tax credit. To avoid this tax, the employer must pay at least 60% of benefit costs. The share of the premium paid by a worker can’t be more than 9.5% of earned income, based on the prior year=s W2. Since large employers are ineligible to buy group coverage on an exchange for two or three years, they should buy coverage through their present insurance brokers. Read more
Timing of year-end contributions:
Contributions made by check are deductible in 2015 if the check is mailed by year-end. If payment is made by bank credit card, it is deductible in 2015 if the charge is made by year-end. It doesn’t matter when the credit card payment is made. If the donation is made with a retail store credit card, the deduction cannot be taken until the card is paid, even though it was charged in 2015.
Donations of securities and other property:
This is an excellent way to make a contribution without paying cash. Taxpayers can deduct the fair value of the securities on the date of the gift. Donating appreciated securities is a good move because if you sold the securities Read more
The three month highway funding extension was passed by the House July 29 and by the Senate July 30. The president signed the bill into law on July 31. The law contains several important tax provisions changing the due dates for partnership and C corporation returns, FinCEN Form 114-Report of Foreign Bank and Financial Accounts (FBAR), several common tax returns and several other IRS information returns It also overrules the Supreme Court’s Home Concrete decision, requires that additional information be reported on mortgage information statements, and requires consistent basis reporting between estates and beneficiaries. Read more
An high deductible health plan (HDHP) has a higher annual deductible than typical health plans and a maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Out-of-pocket expenses include copayments and other amounts, but do not includes insurance premiums (see exception below). It may provide preventive medical care benefits without a deductible or with a deductible less than the minimum annual deductible.
The plan must have a annual deduction and a annual out-of pocket maximum. For family coverage, the terms of the HDHP must deny payments to all family members until the Read more