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Tax changes

Here is a heads up and digest version of the most important changes there are over 40 so get tax-savvy and read on.

Flexible Savings Accounts (FSAs)

Currently health Flexible Savings Accounts (FSA) allow users to save pre-tax dollars for health care costs. A Health Savings Account (HSA) is the similar the difference between the two is that an FSA can only carryover $500 onto the next year, while the HSA carries everything over.

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The new change makes it impossible to switch from any general purpose FSA to an HSA if there is any carry over into 2015. So keep that in mind when deciding whether to lose the $500 or carry it over to the upcoming year.

Unemployment Benefits

Unemployment income is taxable that is not new. What is new is that any supplemental unemployment income, outside of the typical state benefits will also be taxed as wages, not unemployment income. So what that also means is social security taxes will also be taken from that income, as the total amount will be taxed as standard income.

IRA Rollovers

If you have been or plan to rollover a IRA account, this change will affect you. It won't really affect your bottom line taxes, but it is something to know in advance. Only one rollover per year, starting in 2015, is allowed. (Trustee-to-trustee transfers are not counted.)

Tax Bracket Inflation Changes

Standard deduction amounts and tax brackets have both changed for the upcoming year. Each bracket has been widened from 10 percent to 39.6 percent. So if you make a little more this coming year, chances are you won't be bumped into the next higher tax bracket.

As for deductions, the standard deduction has increased to $6,300 for singles and married status filing single. The standard deduction for married couples filing jointly has increased to $12,600 and heads of household deduction increases to $9,250.

Foster Care

This is a big change. In the past, caregivers who provided non-skilled care to dependents that we're family members and received state or certified Medicaid financial assistance used to have to claim that as taxable income. The IRS has now widened and clarified this guidance and "foster care" now includes family members who are living in your home with physical, mental or emotional issues and receiving state or Medicaid benefits. Therefore, those incoming funds are no longer taxable.

2012 Tax Benefits Expired on December 31, 2013

American Taxpayer Relief Act of 2012 allowed for 55 tax benefits that have expired. The jury is out to see if those benefits will be extended for 2014, as it is up to Congress. Some of these benefits that may or may not be extended are, as follows:

    • Teachers could claim up to $250 of expenses that we're not reimbursed by their school district or state funding.

 

    • Credits that we're give to those who made energy-saving home improvements, such as with heating and cooling systems.

 

    • Tuition expenses for higher education would allow for a $2,000 to $4,000 tax deduction.

 

Estate Taxes

If someone leaves you more than $5.43 million in their will, estate taxes will be charged. However, anything less and the inheritance is yours without having to pay a penny of federal taxes on the amount. So enjoy!

Bitcoin

If any payments we're made to you in bitcoin the virtual currency they are taxable as annual income. If you invest in virtual currency, the taxable rate is different than if you receive payments for goods or services in bitcoins.

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Posted in Financial Services Post Date 06/03/2017


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