With tax season fast approaching (sorry), we would like to highlight a few recent tax updates that you may want to consider while you prepare and review your tax returns.
Deduction of state and local sales taxes. For those taxpayers who choose to deduct state and local sales taxes instead of state and local income taxes, the sales tax deduction option expired at the end of 2014, but is now available again.
Energy efficiency credit. Homeowners who install energy-efficient windows, doors, furnaces, or insulation may still be eligible for a nonbusiness energy property credit, which would be claimed on Internal Revenue Service (“IRS”) Form 5695. This credit, too, had expired at the end of 2014, but has now been made available again.
Deductions for certain education expenses. Educators may continue to deduct certain classroom expenses. In addition, eligible parents and college students may continue to take advantage of a deduction for tuition and fees.
Tax-free distributions of individual retirement account (“IRA”) proceeds. Qualified charitable distributions may be transferred tax-free up to $100,000 by IRA owners who are 70½ years old or older.
Achieving a Better Life Experience (“ABLE”) accounts. States may offer ABLE accounts to people with disabilities who became disabled before age 26. Contributions up to the amount of annual gift tax exclusion (i.e., $14,000 for 2015 and 2016) may be made to an ABLE account. These contributions are not deductible, but the distributions are tax-free when used to pay for qualified disability expenses. Michigan has not established ABLE accounts yet. (Brian Jenney explained how an ABLE account works in detail in a prior edition of the Commentator. Please contact Lisa Passalacqua if you would like that, or any prior edition of the Commentator at (248) 528-1111.)
Health insurance premium credits. For taxpayers who do not exceed 400% of the poverty line, a tax credit may be available relating to premiums paid for health insurance by eligible taxpayers.
Same-sex marriage. Same-sex couples who are married legally under state law are treated as married by the IRS for federal tax purposes.
Mileage rates. The standard mileage rate for the use of a vehicle for business is 57.5 cents/mile for the year 2015. (In 2016, the rate goes down to 54 cents/mile.) For medical or moving purposes, the rate is 23 cents/mile.
In closing, we point out that taxes are due on Monday April 18th this year, NOT April 15th.
For further information regarding these matters, please contact Ms. Chon at via email or 248.528.1111.