The holidays are over and it is time to consider if you need to save money for your Income Taxes due April 15. Ask yourself if you are subject to the Additional Medicare Tax if you are self-employed. Your Medicare tax may increase an additional 0.9 percent of wages in excess of certain thresholds. The threshold amounts are $200,000 for single individuals (and heads of household); $250,000 for married filing joint; and $125,000 for married filing separate. If you are employed and receiving a Form W-2 ask your employer whether they have increased your tax withholding when your salary is above the fore mentioned thresholds.
Taxpayers with a potential Net Investment Income Tax (NII) should consider keeping their income below the thresholds listed above $200,000/$250,000/$125,000. Taxpayers with income above these limits are liable for an additional 3.8 percent net investment income tax on unearned income. What is included as investment income other than dividends? NII Tax is considered for rental income unless earned by a real estate professional and capital gains. When your income approaches these thresholds consider the tax consequences.
Most retirees needed to take their required retirement plan distributions (RMD) from their IRAs and workplace retirement plans by December 31. There is an exception! A special rule allows first time recipients of these payments, who reached 70 ½ during 2015, to wait until April 1, 2016 to receive their first RMDs. These payments received in 2016 are taxable in 2016 despite being counted as their 2015 required retirement plan distribution.
On December 17, 2015 the Internal Revenue Service issued the 2016 Optional standard mileage rates. These rates are used to calculate the deductible costs of operating an automobile for business, medical or moving, and charitable purposes. The Internal Revenue Service requires substantiation for these deductible costs such as diary recording date, type of expense incurred, paid medical receipts, and explanation of the business nature of the trip.
The standard mileage rates for the use of a car in 2016 will be:
- 54 cents for business miles driven, down 57.5 cents for 2015
- 19 cents for medical or moving expense, down from 23 cents for 2015
- 14 cents per mile driven in service of charitable organization.
Our firm can help you decide when to use these rates and whether to depreciate your vehicle or use the business standard mileage rate.
Felice Zalk, EA is founder of Felice Zalk, MBA that provides consulting, accounting and tax services for individuals and professional service businesses. She is a member of the National Association of Tax Professionals, American Women’s Society of Certified Public Accountants, and an Enrolled Agent (EA) licensed to practice before the Internal Revenue Service. She has been a Member of the Millburn/Short Hills Chamber of Commerce for over ten years and has helped Individuals and Businesses in the local area with their tax needs. Website: http://www.felicezalk.com