Mid-Year Tax Planning For Those Miscellaneous Items
BOSTON (CBS) - In order to take advantage of tax credits, you need to know what's available. Here are some you may not be aware of:
Medical Deductions
To qualify for a medical deduction this year your unreimbursed medical expenses must exceed 10% of your adjusted gross income, up from the 7.5% it had been. For taxpayers 65 and older, the threshold will at remain at 7.5% through 2016. This deduction can only be used for expenses that exceed those thresholds.
If you are a senior, in addition to items such as hearing aids and eyeglasses, you can deduct a portion of premiums for long-term-care insurance. Make sure you keep track of all qualifying expenses in your tax file. And don't forget to keep track of the mileage and travel costs for medical services.
Summertime Childcare Expenses
Summer vacations are tough on working parents. Especially finding affordable alternative childcare. The Child and Dependent Care Credit is available for expenses incurred during these lazy days of summer as well as throughout the rest of the year.
- The cost of day camp can count as an expense towards the child and dependent care credit
- A sitter in your home qualifies
- Expenses for overnight camps does not qualify
Adoption
For this year, the maximum adoption credit is $13,190. The credit will begin to phase out for families with modified adjusted gross incomes above $197,880, and the credit will go away completely for those with incomes above $237,880.
If you adopt a child with special needs, you are entitled to claim the full amount of the adoption credit, even if your out-of-pocket expenses are less than the tax credit amount. For example, even if you incur no expenses to adopt a special needs child, you are still entitled to the full.
Tax Brackets
Most everyone pays at least 10% on some of their income. As you make more money the tax increases. The highest tax bracket for individuals is 39.6%. It will affect single taxpayers with a taxable income over $406,750 and taxpayers filing jointly with taxable income over $457,600.
Taxpayers in this bracket are also hit with a higher tax rate of 20% on dividends and long-term capital gains.
Check your withholding.
High earning taxpayers will owe an additional 0.9% Medicare tax on earned income of more than $200,000 for single filers or $250,000 for married couples who file jointly.
For example, if you're single and earn $230,000 this year, your employer will be required to withhold 1.45% on the first $200,000 and 2.35% on the next $30,000. A total of $3,605 in Medicare taxes.
These income limits will not be adjusted for inflation so they will include more taxpayers every year.