With just a couple weeks left in 2016, now is the time to make sure you have done everything you can to reduce your income taxes. Here is a sampling of some of the deductions.
If you are an educator for grades K-12, you can deduct up to $250 of unreimbursed expenses. If you have unreimbursed expenses greater than $250 and you itemize, those extra expenses can go on Schedule A on line 21, Unreimbursed employee expenses.
Health Savings Account
If you have a high-deductible health insurance plan, any contributions you make to your health savings account are deductible. If your employer makes contributions to the HSA for you, the contributions are not taxable income for you. The maximum contribution for 2016 is $3,350 for individuals or $6,750 for families.
Contributions to qualified retirement accounts are deductible. Contributions limits for 2016 vary by plan type:
- IRA $5,500.
- Simple IRA $12,500.
- 401(k) $18,000.
- Roth IRAs have the same contribution limit as regular IRAs. Contributions to Roth IRAs are not tax deductible in the year of contribution
Student loan interest/Tuition and fees
Higher education tuition and fees, as well as and student loan interest paid in 2016, can reduce your tax burden. There are income limitations and other requirements.
Medical and dental expenses
If you have had major medical and dental expenses, you may be able to deduct those expenses on Schedule A, Itemized Deductions. Your total expenses must be greater than 10 percent of your adjusted gross income.
- Real estate taxes − If your bank doesn’t pay your real estate taxes as part of your mortgage, you may benefit from paying all of your taxes before Dec. 31 and deducting them on your 2016 tax return.
- Personal property taxes − The taxes you pay on your vehicles are deductible on Schedule A but only the portion that is based on the value of the vehicle.
Home mortgage interest, points and mortgage insurance premiums are all deductible on Schedule A. If you have borrowed money to purchase investments, that interest is also deductible subject to limits.
Make those gifts to charity before Dec. 31 for a deduction on your income taxes. If you write a check, it must be mailed on or before Dec. 31. If you use a credit card, you can deduct the contribution you make in 2016 even if you don’t pay the credit card bill until January.
Have questions or want more information? Contact us: [email protected] or 402-504-3497.Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.