Tax Tips

Tax Preparation Services Professionals in Daytona and Volusia County Tax Tips for 2015

EDUCATION CREDITS, PELL GRANTS AND LIVING EXPENSES
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Pell Grants can now be allocated as living expenses, up to the full amount of actual living expenses — even if a student’s college actually applied the Pell Grant to his tuition and fees. The amount will then count as taxable income, but it might be worth it to maximize the education credit. About nine million students are affected by this. (More information on this topic will be released in 2015)

Many students, usually calculate their Pell Grant funds as being used to pay for qualified education expenses, because their college applies the grant for tuition. That amount will decrease the expenses eligible to be used to claim an education credit like the American Opportunity Credit.

SUBCONTRACTOR/SELF-EMPLOYED – BUSINESS EXPENSES

Taxpayers who owns a business is an independent contractor. The independent contractor can itemize all his business expenses, even if he does not itemize his personal expenses. Schedule C is used to itemize such expenses. Those expenses are not subject to the 2% floor that employee business expenses must exceed to be eligible for such a deduction.
Airlines expenses such as fees for baggage, online booking and fees for changing travel plans can also be deducted as travel expenses. This deduction applies to self-employed travelling on business.

MEDICARE PREMIUMS

Taxpayers who own their own businesses after qualifying for Medicare can deduct the premiums they pay for Medicare Part B and Medicare Part D, plus the cost of supplemental Medicare (medigap) policies or the cost of a Medicare Advantage plan. This deduction is available whether or not you itemize and is not subject to the 7.5% of AGI test that applies to itemized medical expenses. But, taxpayers are not able to claim this deduction if their spouse has employer-subsidized health plan.

ENERGY CREDITS

You can still benefit for a credit up to 30% of the total cost (including labor) if you install qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines.

MILITARY RESERVE AND MEMBERS OF THE NATIONAL GUARD

Military reserve or members of the National Guard may write off the cost of travel to drills or meetings. For qualification purpose, you must travel more than 100 miles from home and be away from home overnight. Taxpayers can deduct the cost of lodging and half the cost of your meals, plus an allowance for driving your own car to get to and from drills.
For 2014 travel, the rate is 56 cents a mile, plus what you paid for parking fees and tolls. You may claim this deduction even if you use the standard deduction. For 2015 the mileage rate is $ 57.5 a mile.

LEGAL FEES PAID TO SECURE ALIMONY

Legal fees and court costs are nondeductible personal expenses, but it may be deducted in some cases. Because alimony is taxable income, you can deduct the part of the attorney’s fee that is attributable to setting the amount, and fees paid for tax advice as well. You can also deduct the portion of the fee that is attributable to tax advice. You must itemize to take advantage of this tax savings, and these costs fall into the category of miscellaneous expenses that are deductible only to the extent that the total exceeds 2% of your adjusted gross income. Make sure to have your attorney to provide a detailed fees statement.

AFFORDABLE CARE ACT PENALTIES

The individual mandate’s fine for going without insurance is higher for tax year 2015. The tax is greater of the two amounts.
The shared responsibility Payment is calculated as follows
1. 2% of the yearly household income for income amounts greater than the filing requirement threshold for the taxpayer’s filing status or $ 325.00 per person $ 162.50 for each family member under 18) with a ceiling of $ 975.00 up $ 230.00 and $ 690.00, respectively. The income-based levy doubles to 2% of the excess of household income over the tax return filing threshold.

The Shared Responsibility Payment is prorated based on the number of months the taxpayer failed to comply with the ACA mandate. Coverage lapses of less than 3 months are not subject to the Shared Responsibility Payment. Some Taxpayers may qualify for an exemption to the Shared Responsibility Payment.

MOVING EXPENSES TO TAKE YOUR FIRST JOB

Job-hunting expenses are not deductible when looking for your first job, but, moving expenses to get to that job are deductible. You do not need to itemize to get the write-off. To qualify for the deduction, your first job must be at least 50 miles away from your old home. If you qualify, you can deduct the cost of getting yourself and your household goods to the new area. If you drove your own car on a 2014 and 2015 move, deduct 23.5 cents a mile, plus what you paid for parking and tolls.

JOB HUNTING COSTS

Taxpayers that are seeking for a position in the same line of work as your current or most recent job, you can deduct job-hunting costs as miscellaneous expenses if you itemize. Qualifying expenses can be written off even if you didn’t land a new job. However such expenses can be deducted only to the amount that your total miscellaneous expenses exceed 2% of your AGI (adjusted gross income). Job-hunting expenses incurred while looking for your first job don’t qualify. Deductible costs include, but aren’t limited to:

Employment agency fees
Food and lodging expenses if your search takes you away from home overnight
Cab fares
Costs of printing resumes, business cards, postage
Transportation expenses incurred as part of the job search, including 56 cents a mile for driving your own car plus parking and tolls

OUT-OF-POCKET CHARITABLE DEDUCTIONS

Please do not overlook the big charitable gifts you made during the year, by check or payroll deduction (check your December pay stub).
Taxpayers can write off out-of-pocket costs incurred while doing work for a charity. For example, ingredients for cakes, pies etc. you prepare for a nonprofit organization’s soup kitchen and stamps you buy for a school’s fund-raising mailing count as charitable contributions. If your contribution totals more than $250, you’ll also need an acknowledgement from the charity documenting the support you provided. If you drove your car for charity in 2014, 14 cents per mile is deductible plus parking and tolls paid. Please keep all your receipts.

REINVESTING YOUR DIVIDENDS

Please keep in mind this is not a tax deduction, but it can help you to save a lot in overpaid taxes. If you have mutual fund dividends automatically used to buy extra shares, remember that each reinvestment increases your tax basis. That, in turn, reduces the taxable capital gain (or increases the tax-saving loss) when you redeem shares. Forgetting to include reinvested dividends in your basis results in double taxation of the dividends—once in the year when they were paid out and immediately reinvested and later when they’re included in the proceeds of the sale. Funds report to investors the tax basis of shares redeemed during the year. As a fact, for the sale of shares purchased in 2012 and later years, funds must report the basis to investors and to the IRS.

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