Got a tax question? We’ve got answers! Many of our clients come to us with tax questions every year. Browse through the common questions below, and if you don’t find your answer, use the form below to ask us your tax-related question(s) and we’ll get back to you with an answer ASAP.

How will my IRA contribution(s) affect my tax return?

Traditional individual retirement accounts, or IRAs, are tax-deferred, meaning that you don’t have to pay tax on any interest or other gains the account earns until you withdrawal the money. Additionally, the contributions you make to the account may entitle you to a tax deduction each year. However, the Internal Revenue Service (IRS) restricts who can claim a tax deduction for contributions to traditional IRAs based on various factors.

There are several deductions to take advantage of when in regards to education expenses. To learn more visit the IRS website here.

Or better yet, come see us and we will make it much easier.

You can claim dependent children until they turn 19, unless they go to college, in which case they can be claimed until they turn 24. If your child is 24 years or older, they can still be claimed as a “qualifying relative” if they make less than $3,950 a year (2014 Tax Year)

If you pay for daycare so that you can work (or look for work), then you may be able to take advantage of the Child and Dependent Care Credit. This credit can be worth up to $2,100. The exact amount depends on the number of children and the amount you spent on childcare.

As a rental property owner, you are entitled to tax deductions. You can write-off interest on your mortgage or on any credit cards used to make purchases for the property. You can write-off your insurance, maintenance repairs, travel expenses, any legal and professional fees, and even your property taxes.

On top of all of these deductions, the government also allows you to depreciate the purchase price of your property based on a set depreciation schedule, even if your property is actually appreciating in value.

The higher your income, the more taxes you’ll pay on your benefits.

Here’s how it works: If you file as an individual and your combined income — by this, Social Security means adjusted gross income and nontaxable interest plus one-half of your Social Security benefits — is below $25,000, your benefits won’t be taxed at all. If income is between $25,000 and $34,000, up to 50 percent of your benefits may be subject to tax. For income of more than $34,000, up to 85 percent of your benefits may be considered taxable income.

If you use the place as a second home — rather than renting it out as a business property — interest on the mortgage is deductible just as interest on the mortgage on your first home is. You can write off 100% of the interest you pay on up to $1.1 million of debt secured by your first and second homes that was used to acquire or improve the properties. (That’s a total of $1.1 million of debt, not $1.1 million on each home.)

You may be able to deduct up to $3,000 of the rent paid on your Indiana home or you may be eligible to take a deduction of up to $2,500 of the Indiana property taxes (residential real estate taxes) paid during the year on your principal place of residence. This varies from state to state, but we can help regardless of the state you are filing you taxes with!

As far as your salary goes, the IRS requires you to earn reasonable compensation for the type of work that you’re doing. As a guideline, the government suggests choosing an amount similar to what another business would pay someone to do what you do.

If you are an officer in a corporation, the law says you must be on the payroll and receive regular checks that include withholdings for Social Security, Medicare, federal income taxes, and state income taxes in states that require them.

If your company is legally structured as an S Corporation, you must receive regular paychecks with those same withholdings, but you also have the option of taking additional money beyond your salary in the form of a draw or distribution. Checks for draws and distributions are written without withholding the taxes that are taken out of a regular payroll check.

Purchasing a new piece of equipment to get a tax deduction does not always save money. Operating a business often requires the purchase of equipment to facilitate growth, expand opportunities and increase efficiency. Purchases obviously affect cash, although a purchase does not always equate to an equivalent deduction. Consequently, understanding the tax implications of your purchase may help you reduce your tax burden and maximize your cash position. CALL US FOR HELP!

It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. So with that said please come in and see us and we can help or visit the IRS website here for more information.

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