155 Essential tax deductible checklist you must use in 2016 › sites › all › themes › ovlg...

155 Essential tax deductible checklist you must use in 2016

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155 Essential tax deductibles

you must use in 2016

Get a hike

File a new W-4 form with your employer for greater return

on investment.

Increase your nest egg

The Internal Revenue Service (IRS) allows you to contribute

a maximum amount of $18,000 toward your 401(k) or other

similar retirement savings plan in 2016 ($24,000 if you’re

aged 50 or above by the end of the financial year).

Cosy up to a Roth 401(k)

Savings you accumulate out of a Roth 401(k) during your

golden days will be tax-free ones.

Participate in an Individual Retirement

Account or IRA

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http://taxes.about.com/od/retirementtaxes/qt/401k-contribution-limits.htm


Based on your earnings as well as you’re a participant in a

retirement savings plan at work, the IRS may permit you to

deduct a certain amount or all of your IRA contribution.

Choose health tax breaks

You can save 20% to 35% or more compared with spending

after-tax money by taking advantages of the health tax

break. This way you’ll not be asked to pay both income as

well as Social Security taxes.

Use pre-tax dollars to pay for child-care bills

Doing so will help you to avoid paying taxes on your income

as well as Social Security benefits and even save one-third

or more of your childcare costs.

Use employer-provided educational benefits

You can ask for a maximum amount of $5,250 as educational help

each financial year. This benefit enjoys tax-free status.

Repay your 401(k) loan before quitting your

3

https://www.irs.gov/publications/p970/ch11.html

https://www.irs.gov/publications/p970/ch11.html


job

This will help you avoid paying a high amount of tax and if

you’re aged below 55 years, then you may have to oblige

with a tax penalty of 10%.

Keep a log of all the job-hunting costs

The IRS allows you to deduct 2% out of all your job-hunting

costs based on your adjusted gross income like travel, food,

accommodation and conveyance.

Record the costs of moving over to a new job

The IRS permits you to deduct the cost of switching jobs

that requires to move at least 50 miles farther from your

current location.

Become a pro in the fight against

environmental damage

You can qualify for a tax credit equal to 30% of the amount

you’d invest in installing alternative energy equipments in

your home. Such equipments could be solar hot water

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heaters, solar electric systems, wind turbines, geothermal

heat pumps, etc. Even labor charges are tax deductible.

Use your financial assets to make charitable

contribution

You can use stocks or mutual fund shares that are at least

more than a year old instead of cash/cheque to make

charitable contributions. You’d qualify for the charitable

contribution deduction as per the fair market value of your

donated securities with respect to the date you made the

contribution. Moreover, you won’t have to pay any taxes on

the profits incurred therein.

Record all the expenses for your social

service activities

If you can keep track of all your expenses for your social

service activities like costs to buy stamps for a fundraising

event, miles driven for charity and so on, then you could ask

for a certain tax deduction.

Plan your wedding at the most opportune

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time

Find out whether a wedding date in the month of December

or January would be preferable to Uncle Sam. Chances are

you and your spouse could end up paying a “marriage

penalty” that could be more than what single filers have to

pay. So, make sure tying the knot saves you on taxes.

Stay informed about tax implications on your

divorce

You must be careful regarding the tax basis while drafting

out an equitable property settlement.

Watch out for dependency exemptions

With respect to the 2015 returns that is due in 18th April,

2016, you can qualify for dependency exemption of $4,000 per

person. For further planning in 2016, the same amount

increases by $50 to stand at $4,050.

Take advantage of the Child Tax Credit (CTC)

The IRS provides with a CTC benefit of up to $1,000 per

child.

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http://www.taxcreditsforworkingfamilies.org/child-tax-credit/

http://www.bankrate.com/finance/taxes/tax-exemption-amounts.aspx

http://www.bankrate.com/finance/taxes/tax-exemption-amounts.aspx


Record the costs of adoption

You can recover the dollars spent towards adopting a child

by the help of tax credit.

Save for college

Savings made for college can be tax free by using the state-

funded 529 college savings plan.

Pay your private school tuition fees via

Coverdells

In a Coverdell Education Savings Account a maximum of

$2,000 can be contributed in any given year. The money

saved in it will be non-taxable and can be used to pay for

educational expenses tax free.

Save for college using Roth IRA

Money can be withdrawn from such an account any time

without inviting any tax or penalty.

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https://newdirectionira.com/ira-info/contributions/coverdell-esa


Pay for your higher education using Savings

Bonds

You can avoid paying any tax on the interests earned for

liquidating a Savings Bond to pay for your child’s higher

education.

Roth IRA can also serve as a long-term nest

egg for a child

Parents or grandparents can contribute to this savings plan

as part of their long-term plan to secure their child’s future.

Funds in Roth IRA are nontaxable and have remarkable

growth prospects.

Roth IRA can help save for your first home

You can save for your first home by using this long-term

savings plan. You’ll be able to withdraw money from it any

time without having to pay any penalty or tax on the same.

Convert your IRA into a Roth IRA

During retirement, funds in the Roth IRA will be tax free.

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Rectify a bad Roth conversion

You can revert any conversion made to your IRA before 15th

October of a given financial year to avoid paying any tax on

the dollars.

Safeguard the future of your heirs

Make sure your IRA goes directly to the heir/dependent

concerned and not to your estate, as withdrawing money

from the estate-administered IRA could prove costly for

him/her.

Protect your inherited 401(k)

For a beneficiary to enjoy funds in this retirement savings

account, he/she must be nominated as the direct

beneficiary of the same. However, a five-year rule would

apply if the 401(k) account goes to the beneficiary via the

owner’s estate.

Let your young adult children enjoy tax credit

for their nest egg

Tax credit can be as high as $1,000 from the Retirement

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Saver’s Credit in a given financial year. This credit is

determined is at the most 50% of the first $2,000

contribution made to an IRA or employer retirement plan.

Lending money to your kids

If you provide your kids with loan of over $10K, then you’ll

have to charge interest on the loan amount. If you don’t

levy any interest on the loan, then you’ll have to report the

interest as income in your tax return.

Tax deduction claim for interest paid on

student loan

A child can enjoy tax deductions on the interest paid toward

their student loan by their parents. However, his/her

parents won’t be able to claim him/her as dependent, even

in absence of an itemized tax deduction.

Home-sale capital gains is non-taxable for

single owner

A home sold at a price of up to $250,000 by a single owner

would be non-taxable as far as capital gains taxes are

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concerned. But, the owner has to use the home as his/her

principal home of residence for at least two years of the

five years leading up to the sale.

Home-sale capital gains is non-taxable for

married owners

In this case, the non-taxable capital gains will $500,000.

However, the home sold must have been used as the

principal home of residence for at least two years by the

married couple.

Interest paid toward home-equity debt is tax-

free

Interest paid on a home equity loan that is as much as

$100,000 is tax deductible.

Second home or rental property can provide

lucrative tax breaks

Interests paid on loan of not more than $1.1 million to

secure first and second are tax deductible.

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Use your vacation home less

To claim tax deduction for the losses incurred due to your

vacation home, you should avoid using it yourself too much.

IRS says you should use your vacation home not more than

14 days or over 10% of the number of days used by a tenant

for personal purpose to qualify for tax deductions.

Participate actively in rental estate market -

A loss of up to $25,000 can be deducted from your tax

return, provided you’re actively involved in the local rental

real estate scene. However, your adjusted gross income

should be below $100,000.

Buy new property via tax-free exchange

options -

Doing so will help you to save on capital gains taxes,

thereby boosting your capacity to invest more toward a

second property.

Make real estate deal in installments -

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This option will provide you with tax deferment. Hence, you

need to levy interest on your real estate deal. Make sure

your each payment has three parts: 1. Capital gain; 2. Return

on investment (non-taxable) and 3. Interest (taxed at

present highest rate).

Turn your vacation/rental property into your

principal home of residence (single owner)

As a single owner, you can enjoy tax deduction of up to

$250,000 for selling your principal residence and converting

your rental or vacation home into principal one.

Turn your vacation/rental property into your

principal home of residence (married couples)

As married couple, you can claim a tax deduction of not

more than $500,000 for selling off your principal home and

turning your rental or vacation property into principal home

of residence.

Your rental income is tax free -

By the special provision, you can rent out your vacation

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home for a maximum of 14 days and don’t have to pay a

dime as tax on the income made therein.

Deduct taxes to recover home buying costs -

The IRS grants you tax deduction to recoup the costs

associated with a home purchase in the same financial year.

Avoid buying tax bills

Purchase mutual funds prior to their payouts and you’ll have

the dividend effectively reduce your cost price. You’ll have

to pay taxes on the amount though. But, if you purchase

mutual funds after their payouts, then you’ll get them at

lower rates and no taxes at all.

Sell your financial assets smartly

You can enjoy preferential tax rates, if you sell your assets

that are at least one year old and qualify as a long-term

gain.

Document the tally of your basis

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With respect to your purchased assets, your ‘tax basis’ is the

amount that you have invested. That amount will help you

to determine profit or loss when you sell your assets. So,

carefully documented tax basis will prevent you from

making unnecessary tax payments.

Optimize your investment portfolio to save

more on taxes

If you’ve incurred some kind of loss, then you may take

home a certain amount of the profits back home tax free.

Work with your broker for sales decisions

When you instruct your broker about selling your shares,

then you’ll have better control over their tax consequences

as well.

Never resort to wash sale rule

If you’ve sold your stock, bond or mutual fund at a loss, then

never buy back those same securities within 30 days of the

deal.

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Get your broker in your favor

If you know that a particular stock is going to crash for sure,

then ask your broker to purchase it from you at a lower than

normal market price. This way you’ll be able to recoup the

losses by claiming tax deductions for the same.

Make early tax payments on restricted stocks

Use 83(b) election, if you’ve received benefits from your

restricted stocks. With its help, you can pay taxes based on

the immediate value of the stock and won’t have to wait till

the restrictions are lifted and the stock ‘vests’.

Opt for tax-free bonds

The fact that return on investment from a tax-free bond

paying 5% interest is higher when compared to a taxable

bond with 7.46% interest. Divide 0.67 by 5 and get your

results!

Make use of treasury bills

To defer on taxes both state and local, you may choose to

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earn treasury interest.

Sell personal property to relatives

Though you don’t earn any loss deduction, yet the buyer will

be able to save on taxes in the future.

Claim your Social Security benefits when

most appropriate

You can claim for the Social Security benefits, if you’ve

stopped working and are aged 62 years or above.

Duck paying 50% penalty

If you’re aged over 70 ½ years, then you should withdraw

minimum amount from your IRA every year.

Track medically necessary improvement costs

Costs exceeding the value of your home or vehicle can be

included into the tax deductible medical expenses.

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Add travel costs to your medical deductions

You can deduct a maximum of $50 per night/per person for

spending toward accommodation while seeking medical

treatment that forces you to stay away from home

overnight. Even the conveyance cost to and from your

physician is tax deductible.

Deduct long-term-care premiums

The premium paid on such an insurance policy is tax

deductible. The key here is that the older you are, the more

deductions you can claim.

Gift your dollars

You can gift as much as $14,000 to anyone in a financial year

without inviting any tax on the amount.

Choose the apt form of business

The type of business you set up will affect your taxation

severely. For example, you could opt for a subchapter S kind

of corporation, limited-liability company (LLC), sole

proprietorship or C-corp.

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Ask your children to work for you

You can derive huge tax benefits, if you employ your

children and your business is still unincorporated.

Claim your business start-up costs

You can deduct $5,00 in business start - up costs , provided your

overall startup costs are $50,000 or lower.

Claim your business operation costs

You can also deduct $5,000 in business operation costs, if

your overall start-up venture costs are $50,000 or lower in

the same year when your business started performing.

Ignore hobby-loss rules

Make sure you follow your hobby as if a business. To this

end, you must have a separate bank account and get

business cards printed. You’re not prohibited from claiming

tax deductions on those activities, provided you can prove

that the losses were incurred while attempting run a

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http://quickbooks.intuit.com/r/taxes/3-tax-deductions-available-only-to-startup-businesses/






business.

Use self-employment income receipts to get

tax deductions

You can extend the receipt of income to next year by

delaying to mail the bills to your clients. For instance, you

can mail the bills late in December so that you don’t get the

payment within 31st December of the same year. Moreover,

you can make business payments before January 1 to

qualify for the deductions.

Never shy away from home-office rules

If you use your home for business purpose, then you can

take advantage of deducting home-office expenses like a

portion of your insurance premiums, utility bills and home

maintenance costs.

Shelter yourself from Alternative Minimum

Tax (AMT)

If you’re seeking shelter from AMT, then you should opt for

ways to increase your income and defer deductions. Here

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http://www.money-zine.com/financial-planning/tax-shelter/alternative-minimum-tax/


are some of the ways you can increase your income:

a. Encash U.S. Savings bonds, Series EE

b. Switch over to taxable bonds from non-taxable ones

c. Choose short-term capital gains on stock positions

d. Close a certificate of deposit to earn the interest

e. Withdraw funds from taxable IRA or 401(k) plan.

Be careful while selling your stock if you’re

qualify for the AMT

You may lose on the favorable tax breaks if your income

rises than stipulated.

Earned income tax credit -

The earned income tax credit (EITC) is provided to lower and

middle-income taxpayers.

Tax credit for the elderly & disabled

You may qualify for tax credit for being elderly and

disabled.

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Medical treatment costs can be deducted

Cost of medical procedures and services like abortion,

acupuncture, addiction treatment, ambulance service,

annual physical examination, artificial teeth, autoette,etc

are tax deductible.

Bandage, blood sugar test kit, body scan, breast pumps,

breast reconstruction surgery, birth control pills, Braille

books and magazines.

Capital expenses, car (special equipment), chiropractor,

Christian Science practitioner, clinic costs, contact lenses,

cosmetic surgery to correct a disfigurement, crutches.

Dental treatment, dentist, diagnostic devices, diagnostic

tests, disabled dependent care expenses, doctor visit, drug

addiction treatment, drugs (when prescribed by a

physician).

Eye doctor, eyeglasses, eye surgery (including laser).

Fertility enhancement, founder’s fee.

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Guide dog or other helper animal service.

Health institute, health maintenance organization, hearing

aids, home care, home improvements, hospital fees and

services.

Insulin, insulin treatments, insurance premiums, (care for

the) intellectually or developmentally disabled.

Laboratory fees, lactation supplies, lead-based paint

removal, learning disability, legal fees, lifetime care, lodging

while receiving medical care (up to $50 a person per night),

long-term care.

Meals, medical conferences, medical examinations, medical

information plan, medical services, Medicare Part B

supplemental costs, Medicare Part D premiums, medicines

(when prescribed by a physician).

Nursing home, nursing services.

Occupational therapy, operations, optometrist, organ

donors, osteopath, oxygen.

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Physical examination, physical therapy, podiatrist,

pregnancy tests and pregnancy test kit, prescription drugs

and medicines, prosthesis, psychiatric care, psychoanalysis,

psychologist.

Reconstructive surgery.

Special education, sterilization, stop-smoking programs and

prescription drugs, surgery.

Telephone, television, therapy, transplants,

transportation**, trips, tuition (under special

circumstances).

Vasectomy, vision correction surgery.

Weight-loss program*, wheelchair, whirlpool baths (if

ordered by a doctor), wig and X-ray.

If you’ve undergone a weight loss program after an analysis

conducted by a doctor, then expenses paid for that is tax

deductible.

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Transportation charges for medical reasons, meals bought

at a hospital, etc are also tax deductible.

Paid life insurance premiums are tax

deductible

Insurance policies that provide income during

unemployment is tax deductible.

Insurance policies for loss of life, limb, sight, function, etc.

Guaranteed money received as part of the compensation

from an insurance policy for sickness or injury is tax

deductible.

Medical insurance coverage included in a car insurance

policy for all the people injured in or by the insured car.

Health or long-term care insurance if the premiums were

paid with tax-free distributions from a retirement plan

made directly to the insurance provider without your

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intercession and these payments would have otherwise

been included in your income.

If you are self-employed and pay for a health insurance that

includes you, your spouse and dependents as the

beneficiary, then the entire sum paid for it is tax deductible

as non-itemized deduction.

Tax deductible expenses of armed forces

personnel

Aid to Families with Dependent Children (AFDC)

Adoption expense reimbursements for qualifying expenses

Damages for physical injury (other than punitive)

Death payments

Dividends of life insurance

Welfare benefits (including TANF) and food stamps

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Supplemental Security Income (SSI)

Accident and/or health Insurance benefits

Worker's Compensation (and FECA payments)

Disability Benefits or Disability Pension payments

Child Support

Compensatory (but not punitive) damages awarded in court

for physical injury or physical sickness

Gifts, Bequests, and Inheritances up to a certain value

Dealer/manufacturer cash rebates

Meals and lodging when required by your job

Long-term Care Insurance payments

Qualified scholarships and grants

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Credit card rewards and points (noncash prizes below $600

or attached to spending habits)

Frequent flyer miles

Qualified canceled mortgage debt

Veterans' Benefits

Medical Savings Account withdrawals

Life insurance benefits

Accelerated death benefits

Reimbursements for theft or casualty loss

Disaster relief grants

Up to $101,300 of foreign earned income

Sickness and Injury Payments

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Federal income tax refunds

Interest on tax-free securities

Interest on EE/I bonds redeemed for qualified higher

education expenses

Payments to the beneficiary of a deceased employee

Relocation payments or payments in lieu of worker’s

compensation

Rental allowance of clergyman

Social security benefits (if it is your only source of income)

Temporary Assistance for Needy Families (TANF)

Uniform allowances for defense personnel

Basic Allowance for Housing to the members of the armed

forces

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Basic Allowance for Subsistence

Moving expenses

Temporary lodging

Travel expenses when on leave between consecutive

overseas tours of duty

Annual round trip for student dependents

Dependent-care assistance program payments

Disability payments

Medical and dental care

Defense counseling

Group-term life insurance premiums

Survivor Protection Plan premiums

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ROTC allowances

Family Separation Allowance

Combat zone pay

Plug-In hybrid and electric cars that are

eligible for the Motor Vehicle Tax Credit

based on the year of the vehicles:

a. AMP GCE and MLE Electric Vehicle

b. Azure Dynamics Transit Connect Electric Vehicle

c. BMW i3 Sedan and i3 Sedan with Ranger Extender, i8

Sedan

d. Boulder Electric Delivery Van DV-500, Electric Shuttle

DV500, Electric Flat Bed DV-500, Electric Service Body

DV-500

e. BYD Motors e6 Electric Vehicle

f. Chrysler Fiat 500e

g. CODA Sedan (Electric Vehicle manufactured by CODA

Automotive Inc.)

h. EVI-MD (Medium Duty) Electric truck, EVI-WI (Walk-In)

Electric truck

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i. EMC Model E36 7 Passenger Wagon, Model E36t Pick-Up

truck, and Model E36v Utility Van

j. Fisker Karma Sedan

k. Ford Focus Electric, Ford C-MAX Energi, Ford Fusion

Energi

l. GM Chevrolet Volt, Chevrolet Spark EV, Cadillac ELR

m.Honda Accord Plug-In Hybrid

n. Mercedes-Benz smart Coupe/Cabrio EV, B-Class EV

o. Mitsubishi i-MiEV (Electric Vehicle)

p. Nissan Leaf

q. Porsche 918 Spyder, Panamera S E Hybrid, Caynee S E-

Hybrid

r. Smart Fortwo Electric Drive Vehicle

s. Tesla Roadster, Tesla Model S Vehicle

t. Think City EV (Electric Vehicle)

u. Toyota Prius Plug-in Electric Drive Vehicle, Toyota RAV4

EV

v. VIA 2500 Extended Range Electric Passenger Van and

Electric Cargo Van, 1500 Extended Range Electric Truck

4WD and 2WD (All body styles)

w. Wheego LiFe Electric Vehicle

x. Zenith Electric Van

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Cars that qualify for the Alternative Motor

Vehicle Tax Credit

a. Mercedes-Benz 2012 F-Cell

b. Honda 2012 FCX Clarity Fuel Cell Vehicle

c. Honda 2011 FCX Clarity Fuel Cell Vehicle

d. Honda 2010 FCX Clarity Fuel Cell Vehicle

e. Honda 2009 FCX Clarity Fuel Cell Vehicle

f. Honda 2008 FCX Clarity Fuel Cell Vehicle

Green Energy Equipments Qualifying for the

Residential Energy Efficient Property Credit

a. Geothermal heat pumps

b. Solar water heaters

c. Solar panels

d. Small wind turbines (up to $4,000)

e. Fuel cells (up to $500 for each 0.5 kilowatt power

capacity) (primary residence only)

Job and Job Hunting Costs That Are Tax

Deductible

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a. Employment and outplacement agency charges

b. Employer pays you back

c. Employer pays the employment agency

d. Moving Expenses

e. Resumé

f. Travel and transportation costs

Home Office and Home Business Tax Breaks

a. General tax deductible home expenses include:

b. Real estate taxes

c. Qualified mortgage insurance premiums

d. Deductible mortgage interest

e. Casualty losses

f. Home business deductions:

g. Depreciation

h. Insurance

i. Rent

j. Repairs

k. Security system

l. Utilities and services

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Oak View Law Group (OVLG) is a leading law firm in the US. It is

dedicated to reduce financial stress of its clients, protect rights and

provide consumer education.

Call: (800)-530-OVLGhttp://www.ovlg.com/

Oak View Law Group APC

4966 El Camino Real STE 225, Los Altos, CA 94022, United States

http://www.ovlg.com/

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