Extended Tax Provisions

Late in December, Congress renewed a number of “extender” provisions that expired at the end of 2015. These provisions may affect some individuals and businesses so it is important to keep track of them for your 2016 filings. . Extended individual provisions include:

1.  $250 educator expense deduction. Made permanent, and adjusting for inflating going forward, teachers can claim this deduction for supplies they’ve purchased for their classrooms.

2. Tuition and fees deduction. Reduce the amount of your income subject to tax by up to $4,000 of qualified education expenses incurred. This provision was extended through December 31, 2016.

3. Itemized deduction for state and local general sales tax. Made permanent, this option is valuable to taxpayers who don’t pay state and local income tax.

4.Itemized deduction for mortgage insurance premiums (PMI). A PMI policy is coverage paid for by the homebuyer, but it protects the lender in case of default on the loan. This provision was extended through December 31, 2016.

5.Qualified principal residence indebtedness exclusion for debt discharge income. This provision, extended through December 31, 2016, applies to most homeowners who default on their loans, and prevents the forgiveness of debt from being included as income on the tax return.

6.Section 529 education plans now allow expenditures for computers, peripheral equipment and software. These tools must be used primarily by the beneficiary during years of academic study.

7. The American Opportunity Credit. Made permanent, this credit covers up to $2,500 of education expenses and was set to expire in 2018.

8.Charitable distributions from IRAs are now permanently tax free. Taxpayers age 701/2 (or older) can make up to $100,000 of annual charitable contributions from an IRA. These contributions are not included as income, nor are they deductible as charitable contributions.

6 Facts to Know Before Deducting a Charitable Donation

If you gave money or goods to a charity in 2015, you may be able to claim a deduction on your federal tax return. Here are six important facts you should know about charitable donations.

1. Qualified Charities. You must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible. An exception to this rule is contributions under the Slain Officer Family Support Act of 2015. To check the status of a charity, use the IRS Select Check tool.

2. Itemize Deductions. To deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return.

3. Benefit in Return. If you get something in return for your donation, you may have to reduce your deduction. You can only deduct the amount of your gift that is more than the value of what you got in return. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.

4. Type of Donation. If you give property instead of cash, your deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market. If you donate used clothing and household items, they generally must be in good condition, or better, to be deductible. Special rules apply to cars, boats and other types of property donations.

5. Form to File and Records to Keep. You must file Form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year The type of records you must keep depends on the amount and type of your donation

6. Donations of $250 or More. If you donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether you received any goods or services in exchange for the gifts.

Being charitable can very rewarding, but it’s important to report your contributions correctly. Contact GFS if you have questions.

Important Tips for Reporting Foreign Income

Did you receive income from a foreign source in 2015? Are you a U.S. citizen or resident who worked abroad last year? If you answered ‘yes’ to either of those questions,  the IRS provides tips to keep in mind about foreign income:

1. Report Worldwide Income. By law, U.S. citizens and residents must report their worldwide income. This includes income from foreign trusts and foreign bank and securities accounts.

2. File Required Tax Forms. You may need to file Schedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts.

3. Review the Foreign Earned Income Exclusion.  If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on up to $100,800 of your wages and other foreign earned income in 2015.

4. Don’t Overlook Credits and Deductions.  You may be able to take a tax credit or a deduction for income taxes paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.

5. Additional Child Tax Credit. You cannot claim the additional child tax credit if you file Form 2555, Foreign Earned Income, or 2555-EZ, Foreign Earned Income Exclusion.

6. Tax Filing Extension.  If you live outside the U.S. and can’t file your tax return by the April 18 due date, you may qualify for an automatic two-month extension until June 15. This extension also applies to those serving in the U.S. military abroad. You will need to attach a statement to your tax return explaining why you qualify for the extension.

 

Mileage Rates for Business, Medical and Moving For 2016

Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

54 cents per mile for business miles driven, down from 57.5 cents for 2015

19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015

14 cents per mile driven in service of charitable organizations

The business mileage rate decreased 3.5 cents per mile and the medical, and moving expense rates decrease 4 cents per mile from the 2015 rates. The charitable rate is based on statute.