Q – How much of a deduction can I get for non-cash charitable contributions and what records to I need to have?

A – The easiest way to figure out a value is to use the Salvation Army Guide.  You can download this from our website in the download section.  You need to have a receipt from the organization where you donated it for any size donation you make.  When you give your information to us we need to know the date, the organization and the deduction amount according to the Guide.  If you need help or an item isn’t listed on the Guide, give us the detail of how many of each item and we will be happy to figure it out for you.  Any non-cash gifts over $5,000 must have an appraisal attached to your return.

 

Q – Can I deduct business miles that I drive?

A – Yes.  If you are an employee earning W-2 wages, you can deduct your miles along with other business expenses on form 2106.  This is then limited to 2% of your adjusted gross income.  If you are self-employed and file a schedule C, you can deduct your miles directly on your schedule.  The IRS requires that you keep detailed information as to the date, number of miles, where you went and for what purpose.  If you don’t keep this detail, they may disallow any deduction.

 

Q – Can I deduct my health insurance?

A – That depends on if you paid for it with before-tax or after-tax dollars.  If you are in a plan with your employer where they withhold an amount for health insurance before calculating your tax withholdings, you can’t take a deduction for it.  If you pay for your health insurance after your taxes are withheld first, you can include it on your itemized deductions.  It is then limited, along with your other medical expenses, to 7.5% of your adjusted gross income.  If you are self-employed or a partner or shareholder in an S-corporation, you can take an above-the-line deduction for your health insurance on the first page of your 1040.  It will be limited to your W-2 earnings from the corporation or to the earnings on your schedule C if you are self-employed.

 

Q – What records do I need to keep for cash contributions?

A – A new law has gone into effect that requires you to have substantiation for all cash contributions.  It used to be that you only needed it for contributions over $250 but that has changed.  Acceptable substantiation is a letter from the charitable organization or a copy of a cancelled check.

 

Q – Are my tuition payments deductible?

A – There are several types of credits available for tuition payments.  Qualified expenses are tuition, fees, books, supplies and equipment required for enrollment or attendance at an eligible educational institution.  These expenses must be paid for yourself, your spouse or your dependent in order to be deductible.  Room and board are not qualified expenses.  This credit is also phased out for high income earners.

 

Q – Should I file jointly or separate from my spouse?

A – This is considered on a case by case basis.  You might be better off filing one way one year and the other way the next year depending on your income and deductions.  When we prepare your return, we do an analysis to decide which is the best way for you to file each year.

 

Q – Can I make a contribution to an IRA and how much can I contribute?

A – You can make a tax deductible contribution to a traditional IRA until you reach age 70 ½.  The allowable contribution you can make will depend on whether or not you are covered by a retirement plan through your employer and it is also phased out for high income earners.  A Roth IRA is never deductible but may have advantages.  There are also limits and tax consequences for any distributions you may take.  Give us a call to discuss the best way to go for your situation.

 

Q – Can I donate my car?

A – You can donate a car to a qualified charitable organization.  However, the rules for this are pretty stringent if the claimed value is more than $500.  If you want to donate your car, you will need to get an appraisal from a qualified appraiser if the value is over $5,000.  There are also limits if the charity sold your vehicle rather than used it for their own purposes.  Please give us a call if you’d like to donate your car and we can help you with what you need to do.