Tax Tips

Will they be renewed?

Once again the following tax provisions have expired:

  • $250 educator expense deduction (school teachers who buy school supplies for their classes).
  • Tuition and fees deduction for higher education expenses (which helps college students or their parents).
  • Itemized deduction for state and local general sales tax (the option to deduct state and local sales taxes instead of deducting state and local income taxes is huge for those who live in states that don’t have an income tax, such as Florida and Texas).
  • Itemized deduction for mortgage insurance premiums.
  •  Qualified principal residence indebtedness exclusion for debt discharge income (up to $2 million; usually taxpayers have to pay income taxes on forgiven debt).

It’s expected that at the end of this year, many of these provisions will be extended once again. However, you may want to make increased estimated tax payments just in case.

You may be eligible for a tax credit

If you already adopted a child or have simply started the adoption process, you may be eligible for a credit on your 2015 tax return. The credit is limited to the qualified adoption expenses you paid, up to $13,400. In addition, the credit is reduced when your modified adjusted gross income is between $201,010 and $241,010.

The adoption credit is not always claimed in the same year the expenses were paid. It all depends on whether the child is a U.S. citizen or resident when the expense is paid, and when the adoption becomes final.

If the child is a U.S. citizen or resident and the adoption expenses (including those incurred in an unsuccessful effort to adopt an eligible child) are paid during a tax year prior to the tax year in which the adoption is finalized, the credit is allowed in the tax year following the year the expenses were paid. If the child is neither a U.S. citizen nor resident, the credit is allowed only in the year the adoption becomes final.

If an expense is paid for a child (regardless of citizenship status) during or after the year the adoption becomes final, the credit is allowed in the tax year paid or incurred.

If the adoption credit for the year exceeds the income tax for that year, the excess credit is carried forward to the next tax year. No adoption credit can be carried forward to any tax year following the fifth tax year after the year in which the credit is derived.

The adoption credit is not a refundable credit for any adoption that occurred after 2011.

If you adopt twins or triplets, you are eligible to claim the tax credit for each child.

All individuals are required to have minimum health coverage starting in 2014. The Affordable Care Act has tasked the Internal Revenue service with administering and collecting the tax credit known as the health insurance subsidy. Anyone that is covered through an employer plan does not have to worry about the tax subsidy, but they should receive the new form 1095 from their employer or employers health plan to show they had health coverage throughout the year. People who went through the Health Exchange for health coverage and received a subsidy were originally qualified for an amount based on their household size and income level. However, once they file their 2014 tax return and reconcile their 2014 income they may find out that they get more of a subsidy or owe some back.

 

If you have any questions in regards to the Affordable Care Act and your 2014 Tax Return feel free to contact us at 716-664-1550 or email us.

Here are a few links that may serve as guidelines to what you are required to have for your 2014 tax return preparation.

 

Do you qualify for a Health Insurance Exemption? Find out if you do by clicking here.

Find out Facts about the Premium Tax Credit here.

For information on Penalties for not having affordable health care click here.