Accurate Advice Newsletter – January 2015

 Protecting Americans from Tax Hikes Legislation signed into law!

What does this mean for you? Many of the tax credits and deductions that were due to expire have have been extended or made permanent! This is great news for many that would be effected by allowing these tax provisions to expire. Here is a few of the many provisions that have been extended and made permanent. If you have questions about the status of a specific tax provision please don’t hesitate to contact us! We cannot cover every provision in this email because so many were updated (56 total tax provisions)!

Child Tax Credit (Permanent)
Nonrefundable; Unaffected by AMT; No Carryover

Maximum credit is $1,000 per child

Phased out if AGI exceeds:

  • Married filing joint $110,000
  • Single/ Head of household $75,000
  • Married filing separate $55,000

Additional Child Tax Credit (Permanent)
Refundable; Unaffected by AMT

It is the lesser of:
The unused portion of the non-refundable child tax credit
or
15% of earned income in excess of $3,000

American Opportunity Tax Credit (Permanent)
A credit for education expenses
Partially Refundable; Unaffected by AMT; No Carryover

  • 100% of first $2,000

  • 25% of the next $2000

Available only for the first four years of college
Up to 40% of credit refundable
Phases out for AGI in the following ranges

  • Married: $160,000- $180,000
  • Single : $80,000 – $90,000

 

Earned Income Tax Credit (Permanent)
A credit for low income taxpayers
Refundable; Not affected by AMT; No Carryover
Must have earned income

AGI must be less than:

Single
Three or more children $47,747
Two children $44,454
One child $39,131
No children $14,820

Married
Three or more children $53,267

Two children $49,974
One child $44,651
No children $20,330

 

Max earned income tax credit for 2015:

Three or more children $6,242
Two children $5,548
One child $3,539
No children $503

Other requirements include:

  • Valid social security number

  • Cannot be married filing separate

  • Investment income must be less than $3,300

  • Must be US citizen or Resident alien all year

  • Must have lived in US more than half the year

  • Must be at least 25 and under 65

  • Cannot be the dependent of another taxpayer

  • Qualifying child cannot be claimed by another person

Educator Expenses (Permanent)
Deduct up to $250 ($500 if both spouses qualify)
Deduction is for 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

Starting in tax year 2016 amount will be indexed for inflation and available for professional development expenses

Tax Free Transfer from IRA to Charity (Permanent)
Allows direct transfer from IRA to charity

  • Amount transferred is excluded from income

  • Not limited to 50% AGI

  • Available to individuals age 70 1/2 and above

  • Meets Required Minimum Distribution requirements

  • Maximum $100,000 per year

Qualified Residence Debt (Extended to debt discharged prior to 2017)
No tax on forgiveness of debt if:

  • The debt is acquisition debt

  • The debt is for a principal residence

  • Limited to $2 million of debt

Mortgage Insurance Premiums (Extended through 2016)
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 the following ranges:

  • Married/Single: $100,000-$109,000

  • Married filing separate: $50,000-$54,500

Standard Mileage Rates

2015

  • Business 57.5 cents per mile
  • Medical  23.0 cents per mile
  • Charitable 14.0 cents per mile

2016

  • Business 54.0 cents per mile
  • Medical 19.0 cents per mile
  • Charitable 14.0 cents per mile

This is just a small selection of the many tax provisions that were either extended or made permanent.

The total tally:

  • 22 Provisions made permanent

  • 4 Provisions Extended 5 years (through 2019)

  • 30 Provisions extended 2 years (through 2016)

The IRS is expecting tax season to open on time January 18th, 2016 despite this massive and last minute update to the tax law. We will keep you updated with further developments.

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Gearing Up for the 2016 Tax Season

Important tax forms will be arriving soon in a mailbox near you

W-2s and 1099s should all be in the mail and postmarked by February 1st. If you haven’t received an expected W-2 or 1099 by the middle of February you should contact the party that should be issuing you the tax form.
If you have moved since leaving a prior job you may need to update your current address with them. It doesn’t hurt to be proactive and call them and update your information so they send your forms to the correct address.

Be on the lookout for the new Health Insurance Tax Forms 1095-A, 1095-B or 1095-C

Starting with tax year 2015 the IRS now requires health insurance companies, the health insurance marketplace and large employers who provide health insurance to issue a form 1095 to report your health insurance coverage for 2015. If you switched insurance providers mid-year you may receive more than 1 form per person. These forms are required to correctly complete your tax return and should be mailed out the same time as W-2s and 1099s.

Note: The IRS just announced an extension of time to file Forms 1095 to March 31,2016 so you may receive the information to complete your tax return later than expected. 

There are some who will not receive a form 1095. These will generally be people enrolled in State sponsored Medicaid, Medicare, and Tri-care. Also those whose health insurance was provided by a small business (less than 50 people) and of course individuals who had no insurance coverage for the year.
In cases where a form is not furnished to you, we will need documented proof of insurance coverage for 2015.