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Tax Tidbits

It’s tax time again! Here are some recent public tax updates we thought might be helpful.

On December 18, 2015, the President signed the Protecting Americans from Tax Hikes of 2015 (PATH) Act. The Act extends over 50 tax provisions that had expired earlier in the year, as well as creates new changes that were not expected. The following is a brief summary of the Act’s major tax provisions impacting financial planning.

  • Teachers’ Classroom Expense Deduction – Elementary and secondary school teachers who work at least 900 hours per school year are allowed an above-the-line deduction of up to $250 for unreimbursed classroom expenses. This deduction is now permanent, and the $250 ceiling amount will be indexed for inflation beginning in 2016
  • Mortgage Insurance Premium Deduction – Many homeowners are required to obtain mortgage insurance. Such premium payments can be treated as deductible interest for a qualified residence through 2016. Mortgage interest premiums are treated in the same fashion as mortgage interest payments, meaning they are subject to the existing AGI phase-out rules that apply to the mortgage interest deduction.
  • Deduction for Qualified Tuition & Related Expenses – The above-the-line deduction for qualified tuition and related expenses for the post-secondary education of a taxpayer, their spouse or a dependent has been extended for 2015 and 2016. The maximum deductible amount is $4,000 if AGI is less than $65,000 ($130,000 married joint filers) and $2,000 if AGI is between $65,000 -$80,000 ($130,000 – $160,000 married joint filers). No deduction is available if AGI exceeds $80,000 ($160,000 married joint filers).
  • Qualified Expenses for 529 Plans – Historically, computers have not been deemed a qualified educational expense unless specifically required for class. Now computers are deemed a qualified education expense including software, peripheral and even internet access expenses. The beneficiary must be enrolled at an eligible education institution. In addition, refunds of tuition paid from 529 accounts will remain a qualified expense if re-deposited to a 529 account within 60 days of the refund.
  • American Opportunity Tax Credit – This credit is for qualified education expenses paid for an eligible student for the first four years of higher education. One may be able to claim a credit of up to $2,500 for adjusted qualified education expenses paid for each student who qualifies for the credit, subject to adjusted gross income (AGI) phase-out amounts of $80,000 (single) and $160,000 (married filing jointly). This credit can be claimed in the same year the beneficiary takes a tax-free distribution from a 529 plan as long as the same expenses are not used for both benefits. The credit was scheduled to expire after 2017.
  • State and local sales tax deduction – The ability to claim an itemized deduction for state and local general sales taxes in lieu of state and local income taxes has been extended for 2015 and made permanent. This provision is particularly beneficial to residents of states that do not impose an income tax.

As you evaluate your finances this tax season, remember that as a member of Great Basin you always have access to Financial Consultant, Steve Lindquist. He can help you with retirement planning, estate planning, college funding, business planning, and more. No cost, no obligation. And he’s a pretty nice guy, too. Contact him today.

This information is for informational purposes only. We always recommend that you speak with a tax professional. Steve Lindquist does not give tax or legal advice or counsel. Securities offered through Cetera Advisor Networks LLC (doing insurance business in CA as CFGAN Insurance Agency), member FINRA/SIPC. Cetera is under separate ownership from any other named entity. California Insurance license # 0G30574 *Insurance noted not offered by Cetera.


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