By PNC Sheldon Ohren
Tax time is here. While most attention has been paid to the federal tax overhaul, most provisions will not affect tax returns filed for 2017.
There is one change you may wish to consider as you fill out your forms. The tax law expanded the availability of the deduction for medical expenses not just for 2018, but also for 2017. The deduction previously applied to medical expenses over 10 percent of adjusted gross income, but the law lowered the bar to 7.5 percent for those two years. So if your adjusted gross income is $40,000, you can write off medical expenses over $3,000 rather than $4,000. But there is a catch, you must itemize to take the deduction. After 2018, the bar is scheduled to move back up to 10 percent.
I will now focus on veterans, especially those recently returning to civilian life.
The first thing to know is that pension payments received after retirement from the military are taxable and should be reported. If you also receive disability benefits from the Department of Veterans Affairs you do not need to report these disability benefits on your personal income tax returns. They may include the following items: (1) Disability compensation and pension payments paid either to veterans or their families; (2) Grants for homes designed for wheelchair living; (3) Grants for motor vehicles for Veterans who lost their sight or use of their limbs, or (4) Benefits under a dependent care assistance program.
The Federal Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers who hire veterans and individuals from other eligible target groups with employment barriers. Veterans who have service connected disabilities, are unemployed for at least four weeks or are receiving SNAP food stamp benefits are also eligible to help their employers through the WOTC.
Employers may also consider taking advantage of these generous tax credits once you are hired. The credit can vary from $2400 to $9000 (dollar for dollar tax reductions) depending upon your circumstances.
In addition, there are federal tax credits available to the general public as well, (e.g. child tax credit and the earned income tax credit). Various state credits may also help, consult your tax advisor for more information.
Lastly, general tax planning strategies for individuals this year include postponing and accelerating deductions as well as careful consideration of timing related investments, charitable gifts, and retirement planning. For example, you may consider one or more of the following: (1) Selling any investments on which you may have a gain or loss or (2) Prepaying deductible expenses such as charitable contributions this year (2017) using a credit card. This strategy works because deductions may be taken on when the expense was charged on the credit account and not when the bill was paid.
This is far from a comprehensive review. These are some of the highlights, and I recommend you have a thorough review of your tax situation with your tax professional.
Volume 72. Number 1. Spring 2018