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Tax Facts
Tax Facts
General
Travel Expenses
What travel expenses are deductible?
The following travel expenses may be tax deductible:
Expense Description
Transportation The cost of travel by airplane, train, bus, or car between your home and your business destination.
Taxi, commuter, bus & limousine Fares for these and other types of transportation between the airport or station and your hotel or between the hotel and your work location away from home.
Baggage & shipping The cost of sending baggage or display material between your regular and temporary work locations.
Car The cost of operating and maintaining your car when traveling away from home on business. You may deduct actual expenses or the standard mileage rate, including business-related tolls and parking on your tax return. If you lease a car while away form home on business, you can deduct on your tax return business-related expenses only.
Lodging The cost of lodging if your business trip is overnight or long enough to require you to get substantial sleep or rest to properly perform your duties.
Meals The cost of meals only if your business trip is overnight or long enough to to require you to get substantial sleep or rest. Includes amounts spent for food, beverages, taxes, and related tips.
Cleaning Cleaning and laundry expenses while away from home overnight.
Telephone The cost of business calls while on your business trip, including business communication by fax machine or other communication devices.
Tips Tips you pay for any expenses in this chart.
Other Other similar ordinary and necessary expenses related to your business travel such as public stenographer's fees and computer rental fees.

Itemized Deductions

Casualty and Theft Loss Rules
Casualty or Theft Loss Deduction Rules
These tax rules apply to a casualty or theft loss of non-business property.

Note: Under the Tax Cuts and Jobs Act, only casualty losses that occur in a Presidentially declared disaster area are deductible as an itemized deduction on Schedule A.

$100 Rule

10% Rule

Definition of Rule You must reduce each casualty or theft loss by $100 when figuring your tax deduction. Apply this rule after you reduce your loss by any reimbursement. You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Apply this rule after you reduce each loss by any reimbursement and by $100 (the $100 Rule).
Single Event Apply this rule only once, even if many pieces of property are affected. Apply this rule only once, even if many pieces of property are affected.
More Than One Event Apply this rule to the loss from each event. Apply the rule to the total of all your losses from all events.
More Than One Person
With loss from the same event (other than a married couple filing jointly.)
Apply the rule separately to each person. Apply the rule separately to each person.
Married Couple
with loss from the same event:


Apply this rule as if you were one person.

Apply this rule separately to each spouse.



Apply this rule as if you were one person.

Apply this rule separately to each spouse.

Filing joint IRS tax return

Filing separate IRS tax return

 

More Than One Owner
(other than a married couple filing jointly.)
Apply this rule separately to each owner of jointly owned property. Apply this rule separately to each owner of jointly owned property.
Charitable Contributions
Are all contributions deductible?
Use the following list for a quick check of charitable contributions you can or cannot deduct on tax returns. Consult Publication 17 for more information and additional rules or limitations that may apply.
Deductible as Charitable Contributions NOT Deductible as Charitable Contributions
Money or property for:
  • A student living with you, sponsored by a qualified organization.
  • Churches, synagogues, temples, mosques and other religious organizations.
  • Dues, fees, and assessments paid to qualified organizations above the value of benefits received.
  • Fair market value of used clothing and furniture
  • Federal, state and local governments, if you contribution is solely for public purposes (for example, a gift to reduce the public debt.)
  • Fraternal orders (if used for qualified purposes)
  • Nonprofit schools and hospitals
  • Nonprofit medical research organizations
  • Out of pocket expenses when you serve a qualified organization as a volunteer.
  • Public parks and recreation facilities.
  • Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts, Girl Scouts, Boys and Girls Clubs of America, World Wildlife Fund, etc.
  • The part of a contribution above the fair market value for items such as merchandise and tickets to charity balls or sporting events
  • Un-reimbursed transportation expenses that relate directly to the services provided for the organization
  • Upkeep of uniforms that have no general use but must be worn while performing services donated to a charitable organization
  • War veterans' groups and certain cultural groups.
Money or property for:
  • Civic leagues and associations, business organizations, social and sports clubs, labor unions, and Chambers of Commerce.
  • Raffle, bingo or lottery tickets.
  • Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups.
  • Foreign organizations (except certain Canadian and Mexican charities).
  • Groups that are run for personal profit.
  • Groups whose purpose is to lobby for law changes.
  • Homeowners' associations
  • Individuals
  • Political groups or candidates for public office.
  • Sickness or burial expenses for members of a fraternal society.
  • Value of blood given to a blood bankor Red Cross..
  • Value of your time or services.

 

Deductibility of Taxes
Which taxes can I deduct?
Note: Under the Tax Cuts and Jobs Act, the itemized deduction for state and local taxes on Schedule A is limited to $10,000.
Tax

You CAN deduct the 
following taxes

You CANNOT deduct the following taxes

Income Tax State and local income tax.
Foreign income tax.
Employee contributions to state funds listed under State benefit funds.
Federal income tax.
Employee contributions to private or voluntary disability plans.
Real Estate Tax State and local real estate tax.
Foreign real estate tax.
Tenant's share of real estate tax paid by cooperative housing corporation.
Tax for local benefits.
Trash and garbage pickup fees.
Rent increase due to higher real estate tax.
Homeowners association charges.
Personal Property Tax State and local personal property tax.
Sales Tax State and Local sales taxes are deductible provided you make the election on Schedule A, line 5, to claim them in lieu of State and Local income taxes.
Other Tax Tax that is an expense of your trade or business or producing income.
One half of self employment tax paid.
Tax on property producing rent or royalty income.
Occupational tax.
Taxes on alcoholic beverages, cigarettes, and tobacco. Taxes on gasoline, diesel, and other motor fuels used in a non-business vehicle. Federal social security (FICA), railroad retirement, gift, and excise taxes or customs duties. (See IRS Publication 17 for details.)
Fees and Charges Fees and charges, such as those for driver's, hunting, fishing, or dog licenses; or water, sewer, and utility taxes or bills, generally are not tax deductible. (See IRS Publication 17 for details.)
Medical and Dental Expenses
What Medical & Dental expenses are deductible?
Note: Under the Tax Cuts and Jobs Act, the threshold for deducting medical  expenses is 7 ½% of AGI for all taxpayers. For 2017 and 2018 the 7 ½% threshold applies for purposes of the AMT in addition to the regular tax. After 2018, the threshold increases to 10% for all taxpayers for both regular tax and AMT purposes.

You CAN deduct the following...

You CANNOT deduct the following...

  • Admission and transportation to a medical conference relating to the chronic disease of a dependent, if it is primarily for and essential to the care of the dependent 
  • Birth control pills prescribed by your doctor
  • Capital expenses for equipment or improvements to your home needed for medical care, or to make the home suitable for a disabled person. (See IRS tax Publication 502)
  • Cost and care of guide dogs or other animals aiding the blind, deaf or disabled.
  • Cost of lead-based paint removal (See IRS tax Publication 502)
  • Dental and orthodontic care
  • Expenses of an organ donor.
  • Hospital services fees (lab work, therapy, nursing services, surgery, etc.)
  • Legal abortion
  • Legal operation to prevent having children.
  • Meals and lodging provided by a hospital during medical treatment.
  • Medical, hospital, dental and long-term care insurance premiums (subject to the age limits) (See IRS tax Publication 17 for details).
  • Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners.)
  • Medicare A premiums for persons not enrolled in Social Security, and Medicare B premiums
  • Oxygen equipment and oxygen
  • Part of life-care fee paid to retirement home designated for medical care.
  • Prescription medicines (those requiring a prescription by a doctor for their use by an individual) and insulin.
  • Psychiatric care at a specially equipped medical center (includes meals and lodging.)
  • Social Security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (See Wages for nursing services below.)
  • Special items (artificial limbs, false teeth, eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, braces, etc.)
  • Special school or home for mentally or physically disabled persons (see IRS tax Publication 502 for details).
  • Stop smoking programs, including cost of prescription drugs designed to alleviate nicotine withdrawal.
  • Transportation for needed medical care at the IRS published rate per mile, or actual out-of-pocket expenses, plus parking fees and tolls. (See IRS tax Publication 17 for details).
  • Treatment at drug or alcohol center (includes meals and lodging provided by the center.)
  • Wages for nursing services ( see IRS tax Publication 502)
  • Weight-loss programs to treat obesity and other diseases diagnosed by a physician
  • Diaper service
  • Diet foods
  • Expenses for your general health (even if following your doctor's advice. However if you doctor has recommended a program as treatment for a specific condition, the IRS has indicated that the cost would be deductible) such as

- Health club dues
- Household help (even if recommended by a doctor.)
- Social activities, such as dancing or swimming lessons.
- Trip for general health improvement.
- Weight loss program.

  • Funeral, burial or cremation expenses.
  • Illegal operation or treatment.
  • Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc.
  • Maternity clothes
  • Meals and lodging while attending a medical conference related to the chronic disease of a dependent
  • Medical expenses paid from a medical savings account (MSA).
  • Medical expenses paid from a flexible savings account (FSA)
  • Medical insurance included in a car insurance policy covering all persons injured in or by your car.
  • Medical insurance premiums paid with pre-tax dollars
  • Medicine you buy without a prescription.
  • Nonprescription drugs or medicines.
  • Nonprescription nicotine gum, patches, or lozenges.
  • Nursing home policies, if the policy ensures a maximum out-of-pocket expense per day.
  • Babysitting, childcare, and nursing care for a healthy baby.
  • Payroll tax paid for Medicare A.
  • Surgery for purely cosmetic reasons.
  • Toothpaste, toiletries, cosmetics, etc.

Investments

Capital Gain Holding Periods
Holding Periods
Note: Under the Tax Cuts and Jobs Act, the capital gains tax rates are unchanged. However, the tax brackets no longer follow the tax brackets for regular income tax purposes.
Asset Held for... Your capital gain is...
One year or less Short term. Report this on Part I of Form 8949 and Schedule D.
More than one year Long term. Report this on Part II of Form 8949 and Schedule D.
Capital Gain and Loss Information Table
Gain and Loss Information Table
If you sold... Your gain is... Your loss is... Report it on...
Stocks, Bonds, Mutual Fund shares, or land held for investment purposes Capital Gain. See Holding Periods. Capital Loss. See Holding Periods. Form 8949 and Schedule D. The totals transfer to Form 1040.
Accounts or Notes receivable acquired in the ordinary course of business or from sales of inventory or property held for sale to customers. Inventory of a business held for sale to customers. Ordinary income. Ordinary loss. Form 1040, Schedule C if self-employed; Schedule F if a farmer; Form 1065 if a partnership; Form 1120/1120-S for a corporation.
Depreciable: residential rental property, cars, trucks, computers, machines, fixtures, equipment, used in your business. IRC section 1231 determines whether the gain is ordinary income or capital gain. Ordinary loss if there is a net IRC section 1231 loss. Form 1040,
Form 4797
Personal residence, autos, jewelry, furniture, art, coin or stamp collections, held for personal use. Capital Gain. See Holding Periods. Not tax deductible. Although profits are taxable, losses are not tax deductible. Form 8949 and Schedule D. The totals transfer to Form 1040.

Dependents

Dependent Qualifications
Dependent Qualifications
Is this a Qualifying Child?
To be a Qualifying Child he/she must:
  • Be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, OR a descendent of any of them such as a niece or grandchild; and
  • Be under age 19 - or age 24 if a student - or any age if permanently and totally disabled; and
  • Have lived with you for more then one-half of the year. Exceptions apply for parents divorced or separated during the year and for children supported by two or more taxpayers.
  • You provided over one-half of his/her support.
Is the Qualifying Child a Dependent?
For a Qualifying Child to be a dependent he/she must:
  • Be a U.S. citizen or national, a resident alien, or resident of Mexico or Canada; and
  • Not be married. If the dependent is married he cannot file a joint return unless the return is to claim a refund and no tax liability would exist for either spouse had they filed separately; and
  • Not be claimed as a dependent on someone else's return.
Is a Qualifying Relative a Dependent?
A relative may qualify as a dependent if:
  • He/she is a person other than a spouse who lived in your home all year as a member of your household if the relationship did not violate the law and the two criteria above are met; and
  • He/she is not a qualifying child of another taxpayer for the year; and
  • He/she had gross income of less than the exemption amount; and
  • You provided over one-half of his/her support.
Child & Dependent Care Credit
Child & Dependent Care Credit

Maximum Allowable Child and Dependent Care Tax Credit

Adjusted Gross Income Credit Percentage One Dependent Two or more Dependents
$15,000 or less 35% $1,050 $2,100
$15,001-$17,000 34% $1,020 $2,040
$17,001-$19,000 33% $990 $1,980
$19,001-$21,000 32% $960 $1,920
$21,001-$23,000 31% $930 $1,860
$23,001-$25,000 30% $900 $1,800
$25,001-$27,000 29% $870 $1,740
$27,001-$29,000 28% $840 $1,680
$29,001-$31,000 27% $810 $1,620
$31,001-$33,000 26% $780 $1,560
$33,001-$35,000 25% $750 $1,500
$35,001-$37,000 24% $720 $1,440
$37,001-$39,000 23% $690 $1,380
$39,001-$41,000 22% $660 $1,320
$41,001-$43,000 21% $630 $1,260
$43,001 and over 20% $600 $1,200

Retirement

Retirement Contribution Credit
Retirement Contribution Credit

A nonrefundable credit is available for contributions to retirement savings plans. The credit is in addition to the deduction (or income exclusion) of the contribution. The credit is equal to the applicable percentage (based on income and filing status), times qualified retirement plan contributions (not to exceed $2,000 of contributions - resulting in a maximum credit of $1,000 at a 50% credit rate).

2017 Credit Phaseout - Modified Adjusted Gross Income

Credit Rate Married Filing Joint Head of Household Single | MFS | QW
50% $0 - $37,000 $0 - $27,750 $0 - $18,500
20% $37,001 - $40,000 $27,751 - $30,000 $18,501 - $20,000
10% $40,001 - $62,000 $30,001 - $46,500 $20,001 - $31,000
0% Over $62,000 Over $46,500 Over $31,000
Contributions to many plans qualify including 401(k), SEP, SIMPLE, Keogh, IRA (traditional and Roth), 403(b), and voluntary after-tax qualified plans. The contribution used to calculate the credit must be offset by certain retirement plan distributions.

Contributions to a qualified retirement plan must be made by an eligible individual, defined as:

  • At least 18 years of age at year end
  • Not a dependent of another taxpayer, and
  • Not a student (generally full time)
Elderly and Disabled Credit 
Elderly and Disabled Credit
Dollar Limits for Eligibility
Filing Status

Nontaxable:
Social Security,
Pensions, Retirement
Disability less than:

and AGI less than:

Single (HH or or Qual. Widower) Age 65 or older,
or under age 65 and retired or disabled
$5,000 $17,500
Married Joint - Both spouses age 65 or over $7,500 $25,000
Married Joint - Both spouses under age 65,
one spouse retired or disabled
$5,000 $20,000
Married Joint - Both spouses under age
65, both spouses retired or disabled
$7,500 $25,000
Married Joint - One spouse age 65 or older, other
spouse under age 65 and retired or disabled
$7,500 $25,000
Married Joint - One spouse age 65 or older, other
spouse under age 65 and NOT retired or disabled
$5,000 $20,000
Married Separate - live apart all year, age 65 or
older, or under age 65 and retired or disabled.
$3,750 $12,500

Health

Sickness and Injury Benefits
Are Your Sickness and Injury Benefits Taxable?
Please Note: This table is intended as a general overview. Additional tax rules may apply depending on the tax situation. For more information about benefits, see "Other Sickness and Injury Benefits" in IRS Publication 17.

Type of Benefit

General Rule

Workers' Compensation Not taxable if paid under a workers' compensation act or a statute in the nature of a workers' compensation act and paid due to a work related sickness or injury. However, payments received after returning to work are taxable.
Federal Employees' Compensation Act (FECA) Not taxable if paid because of personal injury or sickness. However, payments received as "continuation of pay" for up to 45 days while a claim is being decided and pay received for sick leave while a claim is being processed are taxable.
Compensatory Damages Not taxable if received for injury or sickness.
Accident or Health Insurance Benefits Not taxable if the taxpayer paid the insurance premiums.
Disability Benefits Not taxable if received for loss of income or earning capacity due to an injury covered by a "no-fault" automobile policy.
Compensation for Permanent Loss or Loss of Use of a Part or Function of Your Body, or for Permanent Disfigurement Not taxable if paid due to the injury. The payments must be figured without regard to any period of absence from work.
Reimbursements for Medical Care Not taxable - but the reimbursement may reduce the taxpayer's medical expense deduction.

IRS

Record Retention Requirements
Record Retention Requirements
How long should a taxpayer keep tax related records:
  • retain records for 3 years from the time the tax return was due, filed, or amended; or 2 years form the date the tax was paid, whichever is later
  • retain records for 6 years if the tax is underpaid by 25% or more
  • retain records forever if there is a fraud or failure to file issue
  • retain capital gain/loss, net operating loss, and similar records which may form the basis of claims made on future tax returns indefinitely.
Penalties
Tax Penalties
Infraction: Penalty
Late Filing
(If the tax return is more than 60 days late, the minimum penalty is the smaller of $100 or 100% of the tax owed.)

5% per month of the net tax due (maximum 25%)

Late filing due to fraud

15% per month of the net tax due (maximum 75%)

Late tax payments

0.5% per month of the unpaid tax due (maximum 25%) The 0.5% rate increases to 1% after the  IRS issues a notice of intent to levy.

Negligence or disregard of tax rules and regulations

20% of tax underpayment

Fraud

75% of tax underpayment

Substantial understatements of income tax (tax underpayments that exceed the greater of 10% of the correct tax liability or $5,000) 20% of tax underpayment
Over valuations of 200% or more but less than 400% of the correct amount 20% of tax underpayment
Over valuations of 400% or more of the correct amount 40% of tax underpayment
Estate tax and gift tax under valuations of 50% or more of the correct valuation and if the tax underpayment exceeds $5000 20% of tax underpayment
Estate tax and gift tax under valuations of 75% or more of the correct valuation and if the tax underpayment exceeds $5000 40% of tax underpayment
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