Month: April 2017

Did you know that it’s possible to trim your tax bill and save on your energy bills with certain home improvements? Here are some key facts you should know about home energy tax credits:

Non-Business Energy Property Credit

• Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
• The other part of the credit is not a percentage of the cost. It is for the actual cost of certain property. This may include items like water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
• This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
• Your main home must be located in the U.S. to qualify for the credit.
• Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. It is usually posted on the manufacturer’s website or included with the product’s packaging. You can use this information to claim the credit, but do not attach it to your return. Keep it with your tax records.
• You may claim the credit on your 2016 tax return as long as you haven’t exceeded the lifetime limit in past years. Under current law, this credit is only available through December 31, 2016, for qualifying improvements to a taxpayer’s main U. S. home.

Residential Energy Efficient Property Credit

• This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
• Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
• There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
• The home must be in the U.S. It does not have to be your main home unless the alternative energy equipment is qualified fuel cell property.
• This credit is available through 2016.

To claim these credits use Form 5695, Residential Energy Credits. If you would like more information on this topic, please call.

• By Leon Clinton
• April 19, 2017

Medical expenses can trim taxes. Keeping good records and knowing what to deduct make all the difference. Here are four tips to help taxpayers know what qualifies as medical and dental expenses:

1. Itemize. Taxpayers can only claim medical expenses that they paid for in 2016 if they itemize deductions on a federal tax return.

2. Qualifying Expenses. Taxpayers can include most medical and dental costs that they paid for themselves, their spouses and their dependents including:

• The costs of diagnosing, treating, easing or preventing disease.
• The costs paid for prescription drugs and insulin.
• The costs paid for insurance premiums for policies that cover medical care.
• Some long-term care insurance costs.

Exceptions and special rules apply. Costs reimbursed by insurance or other sources normally do not qualify for a deduction. More examples of what costs taxpayers can and can’t deduct are in IRS Publication 502, Medical and Dental Expenses.

3. Travel Costs Count. It is possible to deduct travel costs paid for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. For use of a car, deduct either the actual costs or the standard mileage rate for medical travel. The rate is 19 cents per mile for 2016.

4. No Double Benefit. Don’t claim a tax deduction for medical expenses paid with funds from your Health Savings Accounts (HSAs) or Flexible Spending Arrangements (FSAs). Amounts paid with funds from these plans are usually tax-free.

If you’re wondering whether your medical and dental expenses are deductible on your tax return, don’t hesitate to contact the office.

• By Leon Clinton
• April 16, 2017

If you are a self-employed, you normally carry on a trade or business. Sole proprietors and independent contractors are two types of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return. If you’re self-employed, here are six important tax tips you should know about:

• Self-Employment Income. Self-employment can include income you received for part-time work. This is in addition to income from your regular job.
• Schedule C or C-EZ. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet certain other conditions. Please call if you are not sure whether you can use this form.
• Self-Employment Tax. If you made a profit, you may have to pay self-employment tax as well as income tax. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. If you owe this tax, attach the schedule to your federal tax return.
• Estimated Tax. You may need to make estimated tax payments. These payments are typically made on income that is not subject to withholding. You usually pay estimated taxes in four annual installments. If you do not pay enough tax throughout the year, you may owe a penalty. See, Estimated Tax Payments – Q & A, above, for more information about estimated tax payments.
• Allowable Deductions. You can deduct expenses that you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.
• When to Deduct. In most cases, you can deduct expenses in the same year you paid, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.

Questions about self-employment taxes? Help is just a phone call away.

• By Leon Clinton
• April 13, 2017