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155 Essential tax deductible checklist you must use in 2016
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155 Essential tax deductible checklist you must use in 2016
155 Essential tax deductibles
you must use in 2016
Get a hike
File a new W-4 form with your employer for greater return
on investment.
Increase your nest egg
The Internal Revenue Service (IRS) allows you to contribute
a maximum amount of $18,000 toward your 401(k) or other
similar retirement savings plan in 2016 ($24,000 if you’re
aged 50 or above by the end of the financial year).
Cosy up to a Roth 401(k)
Savings you accumulate out of a Roth 401(k) during your
golden days will be tax-free ones.
Participate in an Individual Retirement
Account or IRA
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155 Essential tax deductible checklist you must use in 2016
Based on your earnings as well as you’re a participant in a
retirement savings plan at work, the IRS may permit you to
deduct a certain amount or all of your IRA contribution.
Choose health tax breaks
You can save 20% to 35% or more compared with spending
after-tax money by taking advantages of the health tax
break. This way you’ll not be asked to pay both income as
well as Social Security taxes.
Use pre-tax dollars to pay for child-care bills
Doing so will help you to avoid paying taxes on your income
as well as Social Security benefits and even save one-third
or more of your childcare costs.
Use employer-provided educational benefits
You can ask for a maximum amount of $5,250 as educational help
each financial year. This benefit enjoys tax-free status.
Repay your 401(k) loan before quitting your
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155 Essential tax deductible checklist you must use in 2016
job
This will help you avoid paying a high amount of tax and if
you’re aged below 55 years, then you may have to oblige
with a tax penalty of 10%.
Keep a log of all the job-hunting costs
The IRS allows you to deduct 2% out of all your job-hunting
costs based on your adjusted gross income like travel, food,
accommodation and conveyance.
Record the costs of moving over to a new job
The IRS permits you to deduct the cost of switching jobs
that requires to move at least 50 miles farther from your
current location.
Become a pro in the fight against
environmental damage
You can qualify for a tax credit equal to 30% of the amount
you’d invest in installing alternative energy equipments in
your home. Such equipments could be solar hot water
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155 Essential tax deductible checklist you must use in 2016
heaters, solar electric systems, wind turbines, geothermal
heat pumps, etc. Even labor charges are tax deductible.
Use your financial assets to make charitable
contribution
You can use stocks or mutual fund shares that are at least
more than a year old instead of cash/cheque to make
charitable contributions. You’d qualify for the charitable
contribution deduction as per the fair market value of your
donated securities with respect to the date you made the
contribution. Moreover, you won’t have to pay any taxes on
the profits incurred therein.
Record all the expenses for your social
service activities
If you can keep track of all your expenses for your social
service activities like costs to buy stamps for a fundraising
event, miles driven for charity and so on, then you could ask
for a certain tax deduction.
Plan your wedding at the most opportune
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155 Essential tax deductible checklist you must use in 2016
time
Find out whether a wedding date in the month of December
or January would be preferable to Uncle Sam. Chances are
you and your spouse could end up paying a “marriage
penalty” that could be more than what single filers have to
pay. So, make sure tying the knot saves you on taxes.
Stay informed about tax implications on your
divorce
You must be careful regarding the tax basis while drafting
out an equitable property settlement.
Watch out for dependency exemptions
With respect to the 2015 returns that is due in 18th April,
2016, you can qualify for dependency exemption of $4,000 per
person. For further planning in 2016, the same amount
increases by $50 to stand at $4,050.
Take advantage of the Child Tax Credit (CTC)
The IRS provides with a CTC benefit of up to $1,000 per
child.
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155 Essential tax deductible checklist you must use in 2016
Record the costs of adoption
You can recover the dollars spent towards adopting a child
by the help of tax credit.
Save for college
Savings made for college can be tax free by using the state-
funded 529 college savings plan.
Pay your private school tuition fees via
Coverdells
In a Coverdell Education Savings Account a maximum of
$2,000 can be contributed in any given year. The money
saved in it will be non-taxable and can be used to pay for
educational expenses tax free.
Save for college using Roth IRA
Money can be withdrawn from such an account any time
without inviting any tax or penalty.
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155 Essential tax deductible checklist you must use in 2016
Pay for your higher education using Savings
Bonds
You can avoid paying any tax on the interests earned for
liquidating a Savings Bond to pay for your child’s higher
education.
Roth IRA can also serve as a long-term nest
egg for a child
Parents or grandparents can contribute to this savings plan
as part of their long-term plan to secure their child’s future.
Funds in Roth IRA are nontaxable and have remarkable
growth prospects.
Roth IRA can help save for your first home
You can save for your first home by using this long-term
savings plan. You’ll be able to withdraw money from it any
time without having to pay any penalty or tax on the same.
Convert your IRA into a Roth IRA
During retirement, funds in the Roth IRA will be tax free.
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155 Essential tax deductible checklist you must use in 2016
Rectify a bad Roth conversion
You can revert any conversion made to your IRA before 15th
October of a given financial year to avoid paying any tax on
the dollars.
Safeguard the future of your heirs
Make sure your IRA goes directly to the heir/dependent
concerned and not to your estate, as withdrawing money
from the estate-administered IRA could prove costly for
him/her.
Protect your inherited 401(k)
For a beneficiary to enjoy funds in this retirement savings
account, he/she must be nominated as the direct
beneficiary of the same. However, a five-year rule would
apply if the 401(k) account goes to the beneficiary via the
owner’s estate.
Let your young adult children enjoy tax credit
for their nest egg
Tax credit can be as high as $1,000 from the Retirement
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155 Essential tax deductible checklist you must use in 2016
Saver’s Credit in a given financial year. This credit is
determined is at the most 50% of the first $2,000
contribution made to an IRA or employer retirement plan.
Lending money to your kids
If you provide your kids with loan of over $10K, then you’ll
have to charge interest on the loan amount. If you don’t
levy any interest on the loan, then you’ll have to report the
interest as income in your tax return.
Tax deduction claim for interest paid on
student loan
A child can enjoy tax deductions on the interest paid toward
their student loan by their parents. However, his/her
parents won’t be able to claim him/her as dependent, even
in absence of an itemized tax deduction.
Home-sale capital gains is non-taxable for
single owner
A home sold at a price of up to $250,000 by a single owner
would be non-taxable as far as capital gains taxes are
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155 Essential tax deductible checklist you must use in 2016
concerned. But, the owner has to use the home as his/her
principal home of residence for at least two years of the
five years leading up to the sale.
Home-sale capital gains is non-taxable for
married owners
In this case, the non-taxable capital gains will $500,000.
However, the home sold must have been used as the
principal home of residence for at least two years by the
married couple.
Interest paid toward home-equity debt is tax-
free
Interest paid on a home equity loan that is as much as
$100,000 is tax deductible.
Second home or rental property can provide
lucrative tax breaks
Interests paid on loan of not more than $1.1 million to
secure first and second are tax deductible.
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155 Essential tax deductible checklist you must use in 2016
Use your vacation home less
To claim tax deduction for the losses incurred due to your
vacation home, you should avoid using it yourself too much.
IRS says you should use your vacation home not more than
14 days or over 10% of the number of days used by a tenant
for personal purpose to qualify for tax deductions.
Participate actively in rental estate market -
A loss of up to $25,000 can be deducted from your tax
return, provided you’re actively involved in the local rental
real estate scene. However, your adjusted gross income
should be below $100,000.
Buy new property via tax-free exchange
options -
Doing so will help you to save on capital gains taxes,
thereby boosting your capacity to invest more toward a
second property.
Make real estate deal in installments -
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155 Essential tax deductible checklist you must use in 2016
This option will provide you with tax deferment. Hence, you
need to levy interest on your real estate deal. Make sure
your each payment has three parts: 1. Capital gain; 2. Return
on investment (non-taxable) and 3. Interest (taxed at
present highest rate).
Turn your vacation/rental property into your
principal home of residence (single owner)
As a single owner, you can enjoy tax deduction of up to
$250,000 for selling your principal residence and converting
your rental or vacation home into principal one.
Turn your vacation/rental property into your
principal home of residence (married couples)
As married couple, you can claim a tax deduction of not
more than $500,000 for selling off your principal home and
turning your rental or vacation property into principal home
of residence.
Your rental income is tax free -
By the special provision, you can rent out your vacation
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155 Essential tax deductible checklist you must use in 2016
home for a maximum of 14 days and don’t have to pay a
dime as tax on the income made therein.
Deduct taxes to recover home buying costs -
The IRS grants you tax deduction to recoup the costs
associated with a home purchase in the same financial year.
Avoid buying tax bills
Purchase mutual funds prior to their payouts and you’ll have
the dividend effectively reduce your cost price. You’ll have
to pay taxes on the amount though. But, if you purchase
mutual funds after their payouts, then you’ll get them at
lower rates and no taxes at all.
Sell your financial assets smartly
You can enjoy preferential tax rates, if you sell your assets
that are at least one year old and qualify as a long-term
gain.
Document the tally of your basis
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155 Essential tax deductible checklist you must use in 2016
With respect to your purchased assets, your ‘tax basis’ is the
amount that you have invested. That amount will help you
to determine profit or loss when you sell your assets. So,
carefully documented tax basis will prevent you from
making unnecessary tax payments.
Optimize your investment portfolio to save
more on taxes
If you’ve incurred some kind of loss, then you may take
home a certain amount of the profits back home tax free.
Work with your broker for sales decisions
When you instruct your broker about selling your shares,
then you’ll have better control over their tax consequences
as well.
Never resort to wash sale rule
If you’ve sold your stock, bond or mutual fund at a loss, then
never buy back those same securities within 30 days of the
deal.
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155 Essential tax deductible checklist you must use in 2016
Get your broker in your favor
If you know that a particular stock is going to crash for sure,
then ask your broker to purchase it from you at a lower than
normal market price. This way you’ll be able to recoup the
losses by claiming tax deductions for the same.
Make early tax payments on restricted stocks
Use 83(b) election, if you’ve received benefits from your
restricted stocks. With its help, you can pay taxes based on
the immediate value of the stock and won’t have to wait till
the restrictions are lifted and the stock ‘vests’.
Opt for tax-free bonds
The fact that return on investment from a tax-free bond
paying 5% interest is higher when compared to a taxable
bond with 7.46% interest. Divide 0.67 by 5 and get your
results!
Make use of treasury bills
To defer on taxes both state and local, you may choose to
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155 Essential tax deductible checklist you must use in 2016
earn treasury interest.
Sell personal property to relatives
Though you don’t earn any loss deduction, yet the buyer will
be able to save on taxes in the future.
Claim your Social Security benefits when
most appropriate
You can claim for the Social Security benefits, if you’ve
stopped working and are aged 62 years or above.
Duck paying 50% penalty
If you’re aged over 70 ½ years, then you should withdraw
minimum amount from your IRA every year.
Track medically necessary improvement costs
Costs exceeding the value of your home or vehicle can be
included into the tax deductible medical expenses.
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155 Essential tax deductible checklist you must use in 2016
Add travel costs to your medical deductions
You can deduct a maximum of $50 per night/per person for
spending toward accommodation while seeking medical
treatment that forces you to stay away from home
overnight. Even the conveyance cost to and from your
physician is tax deductible.
Deduct long-term-care premiums
The premium paid on such an insurance policy is tax
deductible. The key here is that the older you are, the more
deductions you can claim.
Gift your dollars
You can gift as much as $14,000 to anyone in a financial year
without inviting any tax on the amount.
Choose the apt form of business
The type of business you set up will affect your taxation
severely. For example, you could opt for a subchapter S kind
of corporation, limited-liability company (LLC), sole
proprietorship or C-corp.
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155 Essential tax deductible checklist you must use in 2016
Ask your children to work for you
You can derive huge tax benefits, if you employ your
children and your business is still unincorporated.
Claim your business start-up costs
You can deduct $5,00 in business start - up costs , provided your
overall startup costs are $50,000 or lower.
Claim your business operation costs
You can also deduct $5,000 in business operation costs, if
your overall start-up venture costs are $50,000 or lower in
the same year when your business started performing.
Ignore hobby-loss rules
Make sure you follow your hobby as if a business. To this
end, you must have a separate bank account and get
business cards printed. You’re not prohibited from claiming
tax deductions on those activities, provided you can prove
that the losses were incurred while attempting run a
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155 Essential tax deductible checklist you must use in 2016
business.
Use self-employment income receipts to get
tax deductions
You can extend the receipt of income to next year by
delaying to mail the bills to your clients. For instance, you
can mail the bills late in December so that you don’t get the
payment within 31st December of the same year. Moreover,
you can make business payments before January 1 to
qualify for the deductions.
Never shy away from home-office rules
If you use your home for business purpose, then you can
take advantage of deducting home-office expenses like a
portion of your insurance premiums, utility bills and home
maintenance costs.
Shelter yourself from Alternative Minimum
Tax (AMT)
If you’re seeking shelter from AMT, then you should opt for
ways to increase your income and defer deductions. Here
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155 Essential tax deductible checklist you must use in 2016
are some of the ways you can increase your income:
a. Encash U.S. Savings bonds, Series EE
b. Switch over to taxable bonds from non-taxable ones
c. Choose short-term capital gains on stock positions
d. Close a certificate of deposit to earn the interest
e. Withdraw funds from taxable IRA or 401(k) plan.
Be careful while selling your stock if you’re
qualify for the AMT
You may lose on the favorable tax breaks if your income
rises than stipulated.
Earned income tax credit -
The earned income tax credit (EITC) is provided to lower and
middle-income taxpayers.
Tax credit for the elderly & disabled
You may qualify for tax credit for being elderly and
disabled.
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155 Essential tax deductible checklist you must use in 2016
Medical treatment costs can be deducted
Cost of medical procedures and services like abortion,
acupuncture, addiction treatment, ambulance service,
annual physical examination, artificial teeth, autoette,etc
are tax deductible.
Bandage, blood sugar test kit, body scan, breast pumps,
breast reconstruction surgery, birth control pills, Braille
books and magazines.
Capital expenses, car (special equipment), chiropractor,
Christian Science practitioner, clinic costs, contact lenses,
cosmetic surgery to correct a disfigurement, crutches.
Dental treatment, dentist, diagnostic devices, diagnostic
tests, disabled dependent care expenses, doctor visit, drug
addiction treatment, drugs (when prescribed by a
physician).
Eye doctor, eyeglasses, eye surgery (including laser).
Fertility enhancement, founder’s fee.
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155 Essential tax deductible checklist you must use in 2016
Guide dog or other helper animal service.
Health institute, health maintenance organization, hearing
aids, home care, home improvements, hospital fees and
services.
Insulin, insulin treatments, insurance premiums, (care for
the) intellectually or developmentally disabled.
Laboratory fees, lactation supplies, lead-based paint
removal, learning disability, legal fees, lifetime care, lodging
while receiving medical care (up to $50 a person per night),
long-term care.
Meals, medical conferences, medical examinations, medical
information plan, medical services, Medicare Part B
supplemental costs, Medicare Part D premiums, medicines
(when prescribed by a physician).
Nursing home, nursing services.
Occupational therapy, operations, optometrist, organ
donors, osteopath, oxygen.
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155 Essential tax deductible checklist you must use in 2016
Physical examination, physical therapy, podiatrist,
pregnancy tests and pregnancy test kit, prescription drugs
and medicines, prosthesis, psychiatric care, psychoanalysis,
psychologist.
Reconstructive surgery.
Special education, sterilization, stop-smoking programs and
prescription drugs, surgery.
Telephone, television, therapy, transplants,
transportation**, trips, tuition (under special
circumstances).
Vasectomy, vision correction surgery.
Weight-loss program*, wheelchair, whirlpool baths (if
ordered by a doctor), wig and X-ray.
If you’ve undergone a weight loss program after an analysis
conducted by a doctor, then expenses paid for that is tax
deductible.
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155 Essential tax deductible checklist you must use in 2016
Transportation charges for medical reasons, meals bought
at a hospital, etc are also tax deductible.
Paid life insurance premiums are tax
deductible
Insurance policies that provide income during
unemployment is tax deductible.
Insurance policies for loss of life, limb, sight, function, etc.
Guaranteed money received as part of the compensation
from an insurance policy for sickness or injury is tax
deductible.
Medical insurance coverage included in a car insurance
policy for all the people injured in or by the insured car.
Health or long-term care insurance if the premiums were
paid with tax-free distributions from a retirement plan
made directly to the insurance provider without your
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155 Essential tax deductible checklist you must use in 2016
intercession and these payments would have otherwise
been included in your income.
If you are self-employed and pay for a health insurance that
includes you, your spouse and dependents as the
beneficiary, then the entire sum paid for it is tax deductible
as non-itemized deduction.
Tax deductible expenses of armed forces
personnel
Aid to Families with Dependent Children (AFDC)
Adoption expense reimbursements for qualifying expenses
Damages for physical injury (other than punitive)
Death payments
Dividends of life insurance
Welfare benefits (including TANF) and food stamps
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155 Essential tax deductible checklist you must use in 2016
Supplemental Security Income (SSI)
Accident and/or health Insurance benefits
Worker's Compensation (and FECA payments)
Disability Benefits or Disability Pension payments
Child Support
Compensatory (but not punitive) damages awarded in court
for physical injury or physical sickness
Gifts, Bequests, and Inheritances up to a certain value
Dealer/manufacturer cash rebates
Meals and lodging when required by your job
Long-term Care Insurance payments
Qualified scholarships and grants
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155 Essential tax deductible checklist you must use in 2016
Credit card rewards and points (noncash prizes below $600
or attached to spending habits)
Frequent flyer miles
Qualified canceled mortgage debt
Veterans' Benefits
Medical Savings Account withdrawals
Life insurance benefits
Accelerated death benefits
Reimbursements for theft or casualty loss
Disaster relief grants
Up to $101,300 of foreign earned income
Sickness and Injury Payments
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155 Essential tax deductible checklist you must use in 2016
Federal income tax refunds
Interest on tax-free securities
Interest on EE/I bonds redeemed for qualified higher
education expenses
Payments to the beneficiary of a deceased employee
Relocation payments or payments in lieu of worker’s
compensation
Rental allowance of clergyman
Social security benefits (if it is your only source of income)
Temporary Assistance for Needy Families (TANF)
Uniform allowances for defense personnel
Basic Allowance for Housing to the members of the armed
forces
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155 Essential tax deductible checklist you must use in 2016
Basic Allowance for Subsistence
Moving expenses
Temporary lodging
Travel expenses when on leave between consecutive
overseas tours of duty
Annual round trip for student dependents
Dependent-care assistance program payments
Disability payments
Medical and dental care
Defense counseling
Group-term life insurance premiums
Survivor Protection Plan premiums
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155 Essential tax deductible checklist you must use in 2016
ROTC allowances
Family Separation Allowance
Combat zone pay
Plug-In hybrid and electric cars that are
eligible for the Motor Vehicle Tax Credit
based on the year of the vehicles:
a. AMP GCE and MLE Electric Vehicle
b. Azure Dynamics Transit Connect Electric Vehicle
c. BMW i3 Sedan and i3 Sedan with Ranger Extender, i8
Sedan
d. Boulder Electric Delivery Van DV-500, Electric Shuttle
DV500, Electric Flat Bed DV-500, Electric Service Body
DV-500
e. BYD Motors e6 Electric Vehicle
f. Chrysler Fiat 500e
g. CODA Sedan (Electric Vehicle manufactured by CODA
Automotive Inc.)
h. EVI-MD (Medium Duty) Electric truck, EVI-WI (Walk-In)
Electric truck
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155 Essential tax deductible checklist you must use in 2016
i. EMC Model E36 7 Passenger Wagon, Model E36t Pick-Up
truck, and Model E36v Utility Van
j. Fisker Karma Sedan
k. Ford Focus Electric, Ford C-MAX Energi, Ford Fusion
Energi
l. GM Chevrolet Volt, Chevrolet Spark EV, Cadillac ELR
m.Honda Accord Plug-In Hybrid
n. Mercedes-Benz smart Coupe/Cabrio EV, B-Class EV
o. Mitsubishi i-MiEV (Electric Vehicle)
p. Nissan Leaf
q. Porsche 918 Spyder, Panamera S E Hybrid, Caynee S E-
Hybrid
r. Smart Fortwo Electric Drive Vehicle
s. Tesla Roadster, Tesla Model S Vehicle
t. Think City EV (Electric Vehicle)
u. Toyota Prius Plug-in Electric Drive Vehicle, Toyota RAV4
EV
v. VIA 2500 Extended Range Electric Passenger Van and
Electric Cargo Van, 1500 Extended Range Electric Truck
4WD and 2WD (All body styles)
w. Wheego LiFe Electric Vehicle
x. Zenith Electric Van
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155 Essential tax deductible checklist you must use in 2016
Cars that qualify for the Alternative Motor
Vehicle Tax Credit
a. Mercedes-Benz 2012 F-Cell
b. Honda 2012 FCX Clarity Fuel Cell Vehicle
c. Honda 2011 FCX Clarity Fuel Cell Vehicle
d. Honda 2010 FCX Clarity Fuel Cell Vehicle
e. Honda 2009 FCX Clarity Fuel Cell Vehicle
f. Honda 2008 FCX Clarity Fuel Cell Vehicle
Green Energy Equipments Qualifying for the
Residential Energy Efficient Property Credit
a. Geothermal heat pumps
b. Solar water heaters
c. Solar panels
d. Small wind turbines (up to $4,000)
e. Fuel cells (up to $500 for each 0.5 kilowatt power
capacity) (primary residence only)
Job and Job Hunting Costs That Are Tax
Deductible
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155 Essential tax deductible checklist you must use in 2016
a. Employment and outplacement agency charges
b. Employer pays you back
c. Employer pays the employment agency
d. Moving Expenses
e. Resumé
f. Travel and transportation costs
Home Office and Home Business Tax Breaks
a. General tax deductible home expenses include:
b. Real estate taxes
c. Qualified mortgage insurance premiums
d. Deductible mortgage interest
e. Casualty losses
f. Home business deductions:
g. Depreciation
h. Insurance
i. Rent
j. Repairs
k. Security system
l. Utilities and services
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Oak View Law Group (OVLG) is a leading law firm in the US. It is
dedicated to reduce financial stress of its clients, protect rights and
provide consumer education.
Call: (800)-530-OVLGhttp://www.ovlg.com/
Oak View Law Group APC
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