Tuesday, July 25, 2017

Start planning now if you’d like to deduct medical expenses
Medical expenses that aren’t reimbursable by insurance or paid through a tax-advantaged account (such as a Health Savings Account or Flexible Spending Account) may be deductible — but only to the extent that they exceed 10% of your adjusted gross income.

Before 2013, the floor was only 7.5% for regular tax purposes. (Taxpayers age 65 and older can still enjoy that 7.5% floor through 2016. The floor for AMT purposes, however, is 10% for all taxpayers, the same as it was before 2013.)

By “bunching” nonurgent medical procedures and other controllable expenses into alternating years, you may increase your ability to exceed the new 10% floor. Controllable expenses might include prescription drugs, eyeglasses and contact lenses, hearing aids, dental work, and elective surgery.

If it’s looking like you’re close to exceeding the floor this year, consider accelerating controllable expenses into this year. But if you’re far from exceeding it, to the extent possible (without harming your health), you might want to put off medical expenses until next year, in case you have enough expenses in 2014 to exceed the floor.

Have questions about the 10% floor or exactly what expenses are deductible? Ask us!

Will your investment income be subject to the new 3.8% NIIT?
Under the health care act, starting in 2013, taxpayers with modified adjusted gross income (MAGI) over $200,000 per year ($250,000 for joint filers and $125,000 for married filing separately) may owe a new Medicare contribution tax, also referred to as the “net investment income tax” (NIIT). The tax equals 3.8% of the lesser of your net investment income or the amount by which your MAGI exceeds the applicable threshold.
Many of the strategies that can help you save or defer income tax on your investments can also help you avoid or defer NIIT liability. And because the threshold for the NIIT is based on MAGI, strategies that reduce your MAGI (such as making retirement plan contributions) can also help you avoid or reduce NIIT liability.
The rules on what is and isn’t included in net investment income are somewhat complex, so please contact us for more information — and to find out what tax-saving strategies may be effective in your particular situation.

 

IRS issues final regs on tangible property expenses
The regulations (IRS T.D. 9636) provide guidance on how to comply with Sections 162 and 263 of the Internal Revenue Code. These sections require amounts paid to acquire, produce or improve tangible property to be capitalized but allow amounts for incidental repairs and maintenance of property to be deducted — potentially saving you more tax in the current year.

The final regs explain how to distinguish between capital expenditures and deductible business expenses. They replace temporary regs issued in 2011, but they retain many of the temporary regs’ provisions. In addition, they modify several sections and create a number of new safe harbors.

The final regs generally will apply to tax years beginning on or after Jan. 1, 2014. They affect all businesses that own or lease tangible property, including buildings, machinery, vehicles, furniture and equipment.

If you have expenditures related to tangible property, the final regs apply to you. Compliance may require changes to your current capitalization procedures and the filing of Form 3115, “Application for Change in Accounting Method.” If you have questions regarding the final regulations and how to best proceed, we’d be happy to help.

IRS issues final regs on tangible property expenses
The regulations (IRS T.D. 9636) provide guidance on how to comply with Sections 162 and 263 of the Internal Revenue Code. These sections require amounts paid to acquire, produce or improve tangible property to be capitalized but allow amounts for incidental repairs and maintenance of property to be deducted — potentially saving you more tax in the current year.

The final regs explain how to distinguish between capital expenditures and deductible business expenses. They replace temporary regs issued in 2011, but they retain many of the temporary regs’ provisions. In addition, they modify several sections and create a number of new safe harbors.

The final regs generally will apply to tax years beginning on or after Jan. 1, 2014. They affect all businesses that own or lease tangible property, including buildings, machinery, vehicles, furniture and equipment.

If you have expenditures related to tangible property, the final regs apply to you. Compliance may require changes to your current capitalization procedures and the filing of Form 3115, “Application for Change in Accounting Method.” If you have questions regarding the final regulations and how to best proceed, we’d be happy to help.