BETTER TAX AND ACCOUNTING
Certified Public Accountants
Downers Grove, IL
BETTER TAX AND ACCOUNTING ® 5248 Fairmount Ave., Downers Grove, IL 60515, (630) 737-1040
Personal Exempttion and Itemized Deductions Phaseout - The phaseout of the personal exemptionmeans for every $2,500 of Adjusted Gross Income (AGI) above $250,000 for single taxpayers and $300,000 for married filing jointly (adjusted annually for inflation). The $4,050 per person personal exemption will be reduced by 2%. The phaseout of itemized deductions affects certain itemized deductions by reducing the deduction by 3% of AGI that exceeds the threshhold amounts of $250,000 for single taxpayers and $300,000 for married couples. The maximum reduction is 80%. Medical expenses, investment interest expense, casualty and theft and gambling losses are exempt from the phaseout.
Tax News and Recent Developements
Affordable Care Act, New Tax Provisions - A new Net Investment Income Tax of 3.8% applies to individuals estates and trusts that have certain investment income above specified threshold amounts. The Additional Medicare Tax of 0.9% applies to an individual's wages, Railroad Retirement Tax Act compensation and self--employment income that exceed a threshhold amount based on the individual's filing status. The threshold amount is $250,000 for married taxpayers filing jointly, $125,000 for married filing seperate returns and $200,000 for all others.
Most Retirement Plan Dollar Limits Are Changed For 2016 - IRS has announced the 2016 cost-of-living adjustments (COLA) for retirement plans. Most of the limits related to pension and other retirement plans are adjusted by reference to Code Sec. 415(d).
Simplified Home Office Deduction - Taxpayers who qualify for the home office deduction now may elect to use the safe harbor method in caclulating their deduction rather than itemizing and allocating expenses as with the original method. The simplified method allows a deduction of $5 per sq. ft. and is capped at $1,500. As with the old method, the deduction cannot exceed income from that activity.
Deducting Self-Employed Medical Insurance For S Shareholders - Rev. Rul. 91-26 specifically provides that a 2% employee-shareholder may be eligible for an above-the-line deduction under IRC Sec. 162(l) for the cost of accident and health insurance premiums paid by the corporation. The deduction is equal to 100% of the amount paid for medical insurance for the shareholder, his spouse, and dependents and is reported as an adjustment to income on the shareholder's Form 1040.
Small Business Health Care Tax Credit - This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.