Mid-Year Tax Planning Advice For A Few Miscellaneous Things
BOSTON (CBS) – Tax Bracket Changes –
The highest tax bracket for individuals is now 39.6%. It will affect single taxpayers with a taxable income over $400,000 and taxpayers filing jointly with taxable income over $450,000. Taxpayers in this bracket are also hit with a higher tax rate of 23.8% on dividends and long-term capital gains not the 15% most of us will pay. Ouch!
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.
Medical Deductions –
Medical deductions may be out of reach for many taxpayers this year. To qualify 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.
Summer Time 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 the 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.
- Expenses for overnight camps do not qualify.
- A sitter in your home qualifies.
For this year, the maximum adoption credit is close to $13,000 ($12,970). The credit will begin to phase out for families with modified adjusted gross incomes above $194,580, and the credit will go away completely for those with incomes above $234,580.