tax deductions

When an Elderly Parent Might Qualify as Your Dependent

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

It’s not uncommon for adult children to help support their aging parents. If you’re in this position, you might qualify for an adult-dependent exemption to deduct up to $4,050 for each person claimed on your 2017 return.

Basic qualifications

For you to qualify for the adult-dependent exemption, in most cases your parent must have less gross income for the tax year than the exemption amount. (Exceptions may apply if your parent is permanently and totally disabled.) Social Security is generally excluded, but payments from dividends, interest and retirement plans are included.

In addition, you must have contributed more than 50% of your parent’s financial support. If you shared caregiving duties with one or more siblings and your combined support exceeded 50%, the exemption can be claimed even though no one individually provided more than 50%. However, only one of you can claim the exemption in this situation.

Important factors

Although Social Security payments can usually be excluded from the adult dependent’s income, they can still affect your ability to qualify. Why? If your parent is using Social Security money to pay for medicine or other expenses, you may find that you aren’t meeting the 50% test.

Also, if your parent lives with you, the amount of support you claim under the 50% test can include the fair market rental value of part of your residence. If the parent lives elsewhere — in his or her own residence or in an assisted-living facility or nursing home — any amount of financial support you contribute to that housing expense counts toward the 50% test.

Easing the burden

An adult-dependent exemption is just one tax break that you may be able to employ on your 2017 tax return to ease the burden of caring for an elderly parent. Contact us for more information on qualifying for this break or others.

Ensuring Your Year-End Donations Are Tax-Deductible

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Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Many people make donations at the end of the year. To be deductible on your 2017 return, a charitable donation must be made by December 31, 2017. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean?

Is it the date you write a check or charge an online gift to your credit card? Or is it the date the charity actually receives the funds? In practice, the delivery date depends in part on what you donate and how you donate it. Here are a few common examples:

Checks. The date you mail it.

Credit cards. The date you make the charge.

Pay-by-phone accounts. The date the financial institution pays the amount.

Stock certificates. The date you mail the properly endorsed stock certificate to the charity.

To be deductible, a donation must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions. The IRS’s online search tool, “Exempt Organizations (EO) Select Check,” can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access it at https://www.irs.gov/charities-non-profits/exempt-organizations-select-check. Information about organizations eligible to receive deductible contributions is updated monthly.

Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making. But act soon — you don’t have much time left to make donations that will reduce your 2017 tax bill.

Tax lesson for teachers: Educator expenses can be written off

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

tax deductions for teachers

Teachers on average spend $530 of their own money during the school year to pay for supplies, snacks for students and other classroom items.

Teachers and other educators can get a tax deduction of up to $250 for some of those costs as well as continuing education expenses.

Even better, they don’t have to itemize to get the tax break. Educator expenses are one of the so-called above-the-line deductions claimed directly on a Form 1040 or via tax software.

Educator expenses deduction enhanced

Congress made the tax break for educators a permanent part of the tax code in 2015.

Lawmakers also indexed the $250 maximum deduction amount for inflation. It didn’t change for the 2016 tax year, because of low inflation, but it could increase in future years.

What items are deductible?

Besides teachers, counselors, principals and aides can take the deduction if, for the tax year, they were employed at a state-approved public or private school system from kindergarten through grade 12, and worked at least 900 hours during the school year.

Educators can write off unreimbursed costs for:

  • Books
  • Supplies
  • Computer and other equipment (including software and services)
  • Supplementary materials used in the classroom
  • Professional development programs

The IRS also applies its “ordinary and necessary” rule here. An item purchased for your classroom must be considered ordinary:  something that is common and accepted in the education profession.

It also must be necessary: defined as helpful and appropriate, though maybe not required.

So buying a recording of “Death of a Salesman” to help drive home Arthur Miller’s points to your students would likely meet tax muster. But purchasing a new HD television, instead of watching on your school’s working-but-old set, may raise some IRS eyebrows.

Couples who share education careers could get a double break if they file jointly. However, each spouse is limited to $250 of qualified expenses.

What about home schooling? Sorry, but the tax law specifically states that costs for this type of instruction don’t count toward the educator expenses deduction.

Circumstances could limit expenses

In addition to the eligibility requirements on expenses, the IRS has set some other restrictions on what’s deductible.

The tax agency says when an educator uses any tax-favored funds to pay for his or her own schooling, those amounts must be subtracted from the total the teacher claims under the educator expenses deduction.

Take for example Joe Jones, a high school English teacher who is working toward his master’s degree in literature during school breaks. He cashed in savings bonds to pay his tuition and excluded the bonds’ $150 interest from tax. He also spent $200 for books on Shakespeare to distribute to his 11th-grade students. He must subtract the $150 in tax-free interest from the $200 for the books, leaving him only $50 to claim under the educator expenses deduction.

The same rule applies to nontaxable earnings a teacher gets from qualified state tuition programs or tax-free withdrawals from a Coverdell education savings account.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.