Current and future tax item updates

as of March 2, 2015

FUTA Credit Reduction

Ohio’s effective FUTA rate was scheduled to be 1.8% for 2014. The reduction of the credit against the full FUTA tax rate means employers will owe a greater amount of tax. The credit was scheduled to decrease by 0.3% for each year until the state has repaid its loan in full to the federal government. For more information, please visit:

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/FUTA-CreditReduction?cid=elq_sales_enablement

Sales & Use Tax

The State of Ohio continues to put an emphasis on educating the public about Ohio “Use Tax.” They will follow up by concentrating efforts on the collection of unpaid sales and use tax from businesses in the near future. Because Use Tax has not been a focal point in the recent years, the State is offering an Amnesty Program for unpaid Use Tax

For more information about the Sales and Use Tax please visit:

Ohio Department of Taxation Sales & Use Tax

Standard Mileage Rates

Business Mileage Rate   Medical & Moving Rate     Charitable

2015

57.5 cents/mile                        23 cents/mile                     14 cents/mile

2014

56 cents/mile                     23.5 cents/mile                       14 cents/mile

For more information, please visit:

http://www.irs.gov/taxpros/article/0,,id=156624,00.html

The Patient Protection and Affordable Care Act

There are a number of tax provisions in this act. Some are in effect now and some will be implemented during the next several years.

For current provisions, please visit:

http://www.irs.gov/newsroom/article/0,,id=220809,00.html

For a list of current and future provisions, please visit:

http://www.journalofaccountancy.com/Web/20102724.htm

Tax Benefits for Education

The American Opportunity Tax Credit (AOTC) is available to first-year through fourth-year college students. The maximum annual credit is $2,500 and up to 40% of the credit maybe refundable.  The AOTC is extended through 2017.

The Lifetime Learning Credit will remain at $2,000.

The Tuition and Fees deduction can reduce your income by up to $4,000.

These deductions and credits are subject to AGI limitations. We will evaluate your situation to determine which option is best for you.

For more information, please visit:

http://www.irs.gov/uac/Five-Ways-to-Offset-Education-Costs

Consumer Energy Efficiency Tax Credits

Most energy tax credits expired December 31, 2014. There are still tax credits for Geothermal Heat Pumps, Small Wind Turbines (Residential) and Solar Energy Systems.

Check out the link for more details.

Ohio Incentives/Policies for Renewables & Efficiency

There are various incentive programs offered by local governments and utility companies.  For more information please visit the following link.

Accelerated Depreciation

For the 2015 tax year, Section 179 has been restored to its original limits of $25,000 and there are no current provisions for bonus depreciation. We will watch for any further updates.

In 2014, the maximum accelerated depreciation was $500,000 with a $2 million investment limit, and 50% “Bonus Depreciation” is available.

Elective Salary Deferrals

Taxpayers can defer $18,000 under elective salary deferral plans for 2015 ($12,500 for SIMPLE plans). The catch-up contribution limit for taxpayers 50 or older is $6,000 ($3,000 for SIMPLE plans).

The 2014 maximum was $17,500 ($12,000 for SIMPLE plans) with the $5,500 ($2,500) catch-up contribution limits.

For more information, please visit:

IRS Limitation on Elective Deferrals

Traditional & Roth IRA Contribution Limits

For 2014 and 2015, the IRA and Roth IRA contribution limit is $5,500, with a catch-up contribution of $1,000 for taxpayers 50 or older. For more information, please visit:

IRS IRA Contribution Limits

Charitable Donations from IRAs

This special tax advantage has not been extended beyond 2014. We will watch for any further developments. Prior to 2014, distributions from individual retirement accounts directly to public charities were tax-free, for individuals 70½ or older, up to a maximum of $100,000 from each taxpayer’s own IRA ($200,000 MFJ total) per year through 2014.

Health Savings Account

In 2014, the contribution limit is $3,300 for individual coverage (up $50 from 2013) and $6,550 for family coverage (up $100 from 2012). (If age 55 or older, you are allowed a “catch-up” contribution of $1,000.) For 2014, contributions must be made by April 15, 2015.

In 2015, the contribution limits are $3,350 for individual coverage and $6,560 for family coverage. Catch-up contributions remain the same

For more information, please visit:

http://www.treasury.gov/resource-center/faqs/taxes/pages/health-savings-accounts.aspx

 Starting in 2011, HSAs, HRAs, and FSAs cannot be used for over-the-counter medicine.

Mortgage Insurance Deduction

Currently expired as of December 31, 2014

Mortgage insurance premiums were deductible through 2014 as an itemized deduction. This was another relief provision for homeowners. The three requirements were (1) the insurance must have been in connection with the home acquisition debt, (2) the contract must have been issued after 2006, and (3) the premiums must have been paid during the year

Cancellation of Mortgage Debt Relief

Currently expired as of December 31, 2014

For tax years 2007 through 2014, if a taxpayer had debt forgiven or cancelled on the personal residence due to loan modification or foreclosure, they may have qualified for relief of the tax on that debt forgiveness. Usually, if debt is reduced or forgiven it must be included as income and subject to income tax. The Mortgage Forgiveness Debt Relief Act of 2007 allowed exclusion of income as a result of reduced debts owed.

For more information, please visit:

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Car Donations

Beginning in 2005, the rules for car donations changed, making such donations less attractive. Previously, taxpayers could deduct the fair market value of cars donated to a charity. However, if the charity sells the car, a taxpayer’s deduction is equal to the proceeds received by the charity. If the charity does not sell the car and instead uses the car in furthering its charitable purpose, the taxpayer may be entitled to deduct the vehicle’s fair market value if certain conditions are met.

Sales Tax Deduction

Currently expired as of December 31, 2014

This previously existed for individuals who itemized their deductions. Sometimes the total sales tax paid for the year was more advantageous than deducting your state and local taxes. If you had made any major purchases before December 31, 2014, you may want to review your options.

For more information, please visit:

http://www.irs.gov/individuals/article/0,,id=152421,00.html

Kiddie Tax Extended

Kiddie tax now applies to parents with children up to the age of 18 or under the age of 24 if a full-time student with investment income over $2,000. The first $1,000 is exempt and the next $1,000 taxed at the child’s tax rate.

For more information, please visit:

http://www.irs.gov/taxtopics/tc553.html 

Educator Expense

Currently expired as of December 31, 2014

Eligible out-of-pocket expenses paid for classroom materials by primary and secondary educators can be deducted as an above the line adjustment up to $250. Amounts above that limit may be deducted but are subject to a floor of 2% of AGI.

Ohio Commercial Activity Tax

Businesses operating in Ohio and having more than $150,000 in annual taxable gross receipts are required to register and file for the CAT. Annual CAT Tax returns are due May 10th. Quarterly filers’ due dates are the tenth (10th) day of the second month following each tax period (Feb. 10, May 10, Aug. 10, and Nov. 10).

Starting January 1, 2014, the annual minimum tax became a tiered structure.  Also, all CAT filers have to file and pay electronically via Ohio Business Gateway.  Annual taxpayers may utilize TeleFile to file and pay the annual CAT return.

For more information please visit:

http://www.tax.ohio.gov/commercial_activities.aspx

Qualified Production Activities Income Deduction

The Code Section 199 Qualified Production Activities deduction went into effect in 2005 and can benefit many businesses. It provides a percentage deduction for the lesser of: (1) a taxpayer’s qualified production activities income for the tax year, or (2) taxable income (or, for an individual, adjusted gross income), determined without regard to Code Section 199, for the tax year. The rate is 9% in 2010 and thereafter.

Annual Gift Tax Exclusion

The annual exclusion for gifts in 2014 & 2015 is $14,000, the same as 2013.