Tips for Tax Deduction and Credit Planning

Tax season is in full swing — and the federal filing deadline is fewer than two months away on Tuesday, April 18. As you prepare to file your taxes, we want to help you make the most of your available credits and deductions. After all, every dollar you do not spend on taxes is one you can potentially invest toward your financial future. So, we’ve compiled tips for tax deduction and credit planning, with information on who is eligible and how you could possibly benefit.

Understanding Available Credits

Each tax credit you qualify for will directly reduce your tax payments. The IRS offers two kinds of credits: refundable and nonrefundable. With refundable credits, you can receive a refund, even if you owe less than the credit amount. On the other hand, nonrefundable credits offer a refund amount up to your tax liability.

Knowing which tax credits you qualify for can significantly reduce the amount of taxes you owe — and possibly even result in a refund. The IRS has a number of credits for individual taxpayers, but here is a list of common ones you could qualify for:

  • Earned-Income Tax Credit: For households with low- to moderate-income.
    The income limits can fluctuate, and many more people qualify for this credit than may realize it. In fact, 25% of eligible taxpayers do not claim this credit — which can be over $6,000 per household.
  •  Child and Dependent Care Credit: For households who pay for childcare.
    If you have dependent children and pay for childcare, you may qualify for credits up to $6,000, depending on your adjusted gross income (AGI).
  • Credit for the Elderly or Disabled: For taxpayers 65 and older, or those on permanent disability who meet income requirements.
    This credit starts at $3,750 and goes as high as $7,500. So, if you fit the age or disability restrictions, researching your eligibility is well worth the effort.
  •  Lifetime Learning Credit: For households paying for education.
    This credit can provide you up to $2,000 toward qualified tuition and enrollment fees. To be eligible, you must have a modified AGI less than $130,000 as a married couple or $65,000 as an individual.
  • Premium Tax Credit: For households that purchased health insurance through a federal or state marketplace.
    This credit helps people cover the cost of premiums for insurance they purchase through the Health Insurance Marketplace. Depending on your income and other personal details, you may be able to receive a premium tax credit if you, your spouse, or your dependent purchased an eligible health insurance plan.

 Planning Your Deductions

Deductions help reduce your taxable income, thereby hopefully lowering your tax liabilities. Between itemized and standard deductions, taxpayers claimed nearly $2 trillion in the most recently tracked year. That’s a lot of money! But, chances are, many people miss eligible deductions and still pay more in taxes than they need to.

Remember, when you use the standard deduction, you can likely claim a higher deduction if you or your spouse has a qualifying vision impairment or a birthday on January 2, 1952, or earlier.

If you itemize your deductions, you are likely familiar with the opportunities to write off your home mortgage interest, tuition fees, and charitable contributions. But here are a more few deductions you may be eligible to take, depending on your circumstances:

  • State Sales Tax: Mostly for households who don’t pay state or local income tax.
    If you only pay federal income taxes, you may be able to deduct your state sales tax on your federal return. This deduction is especially helpful if you made a large, taxable purchase in 2016, such as a car.
  • Business Travel Expenses: For taxpayers who have unreimbursed work travel.
    If you paid for travel to conferences, meetings, or other work obligations, you may be able to deduct your expenses. The list of potentially deductible items goes beyond transportation and lodging to include dry cleaning, meals, business calls, and more.
  • Student Loan Interest: For households paying student loan debt.
    If you currently pay student loan debt, you may be able to deduct interest, depending on your income and specific circumstances. Deductions can be up to $2,500 for student loan interest — and you are allowed to claim this deduction even if you don’t itemize deductions on your tax return.
  • Sale of Your Home: For households who profited from selling their main home in 2016.
    If you sold your primary residence last year and earned a profit, you may qualify to claim this exclusion. If you qualify, you can exclude up to $250,000 of the gain from your income – or up to $500,000 if you file taxes jointly with your spouse.

Because the opportunities to reduce your tax liabilities are vast, and these credits and deductions are only the beginning, it is best to consult with your tax preparer or a qualified tax professional. Various factors in your unique financial life will guide what options are available to you. If you have questions or would like to learn more about how you can make the most of your 2016 federal taxes, we are happy to talk. Send us an email, or give us a call at (419) 425-2400. We can also connect you with qualified tax professionals, should you seek further support.

Recent Changes to IRA Rollover Rules

Image courtesy of

Image courtesy of

The IRS recently issued new guidance about the rules governing rollovers* from Individual Retirement Accounts (IRAs).1 The new regulations state that IRA owners will only be allowed one 60-day rollover per 12-month period, regardless of how many IRAs they own. Prior to this update, the IRS had permitted taxpayers to take one rollover every year for each of their IRAs.

The new rule will go into effect on January 1, 2015, giving clients and advisors time to adapt to the change. Any rollovers that take place before the beginning of next year will be grandfathered in under the old interpretation and be unaffected by the change.

What Are the Tax Consequences of the New Rule?

Under the new rules, you’ll be allowed to treat a single cash distribution from any of your IRAs as a 60-day rollover every 12 months. For example, if you take a distribution from your Traditional IRA on January 10th next year, you will have 60 days to roll it over to another IRA. The day you take your distribution, the clock starts ticking and you won’t be eligible for another rollover for 12 months.

If you take another distribution from your IRA before the 12 months is up, it will be treated as a taxable event. You’ll have to report the distribution as income and pay taxes at your ordinary rate. If you’re under 59 ½, you may be subject to a 10 percent early withdrawal penalty. If you try to return the money to an IRA, the IRS will treat it as an excess contribution and levy a 6 percent tax on the assets as long as they remain in the IRA.

Are There Any Exceptions to the New Rollover Rule?

According to the IRS2, the once-per-year limit does not apply to:

• Roth conversions from traditional IRAs
• Trustee-to-trustee transfers between IRAs
• IRA-to-retirement plan rollovers
• Retirement plan-to-IRA rollovers
• Plan-to-plan rollovers.

In plain English, rollovers that go directly from one retirement account to another, without passing through your hands, do not count against your annual allotment. However, any checks or wires that are made out to you personally (and not the trustee of your retirement account) will be subject to the 12-month rollover limit.
While most investors will not be unduly affected by this rule change, we can learn an important lesson from the situation: the tax code is constantly being updated and investors can expect new changes in the future. As advisors, one of our most important duties is staying abreast of the shifting regulatory environment and making changes to our clients’ strategies where necessary.
If you are concerned about how your retirement strategies may be affected by the new rules regarding rollovers or have any questions about the information included in this letter, please contact us. We would be happy to be of service to you.
*Rollovers are generic layman’s terms for moving from one retirement account to another. There are different kinds of rollovers and some are actually transfers. That is why there are some exceptions to the rule.

10 Ways to Avoid Common Tax Filing Errors

Image courtesy of Miles

Image courtesy of Miles

Tax time is here and we’re getting close to the April 15th filing deadline. Tax laws changed significantly in 2013 and taxpayers are now responsible for several new taxes as well as changes to deduction limits and exemption phaseouts.1

Last year, the IRS published a list of common tax filing errors2 that we wanted to pass along with our tips for avoiding them. You can prevent the vast majority of these mistakes with a little extra attention or the help of a professional tax advisor.

It’s in your benefit to catch errors before filing because a simple oversight could delay or cost you a refund, if you’re entitled to one. A blunder that causes you to underpay your taxes could lead to stern letters and penalties from the IRS or, worse, trigger an audit.

Here’s how you can avoid making one of these common errors:

1.         File electronically. By filing electronically, you can use computer software to catch many common mistakes. E-filing can also reduce the chances that an error in processing is made by the IRS.3

2.         Review your deductions. The IRS says many mistakes happen when taxpayers are calculating their deductions. For example, remember that if you are age 65 or older, you qualify for a larger standard deduction.4 Under time pressure, many taxpayers take the standard deduction instead of itemizing, potentially increasing the size of their tax bill. A tax professional can help you determine the best way to treat deductions.

3.         Check your charitable contributions. Missteps involving charitable deductions are quite common; it’s important to understand what the IRS allows you to deduct and how you must document it. You can consult a tax advisor or review IRS Publication 526 for more information.5 Don’t forget to claim any charitable contributions you made through payroll deductions or as qualified charitable distributions from your IRA.

4.         Share important information with your tax preparer. Working with a tax specialist can help cut down on expensive errors, but they aren’t mind readers. Don’t make the mistake of failing to share vital information with your tax preparer.

5.         Choose the right number of dependents. While this should be a simple decision, it becomes complicated during life’s transitions. For example, if your child recently got a full-time job or you are newly responsible for an elder’s care, you may want to review whether you can claim them as dependents or not.

6.         Correct the spelling of names and social security numbers. Make sure that all names and Social Security numbers match what’s on your (and your spouse’s) Social Security cards. If you’ve changed your name since the last time you filed your taxes, you’ll need to notify the Social Security Administration (SSA) so they can update their information. You can do this by filing form SS-5 at your local SSA office or by mail.6

7.         Double-check your direct deposit information. Most taxpayers give the IRS bank account information to receive their refund by direct deposit. Unfortunately, if you’ve given the IRS the wrong account information, your refund could easily go astray.

8.         Sign the return and attach all documents. The IRS won’t accept unsigned tax returns, so it’s critical that you (and your spouse if you file jointly) sign your 2013 tax return and include all necessary schedules and documents. Don’t forget to include a check for any taxes owed.

9.         Report any additional income. If you picked up a side job this year or are receiving income from your investments, be sure to report it to the IRS. If you forget to include this information on your return, there’s a good chance that you could owe additional taxes and penalties on your unreported earnings.

10.       Consult a professional. Tax laws are complex and consumer-grade tax preparation software is designed to meet the needs of the average taxpayer. If you have a complicated tax situation, a tax specialist can help you prevent mistakes and identify potential tax savings.

If you have any questions about the information we’ve presented or are concerned about your taxes, please contact us…we’d be delighted to help.

Increasing the Impact of Year End Charitable Giving

With the end of 2013 approaching, many of our clients are thinking about what charitable gifts they want to make. Here are a few tips on giving effectively and maximizing the tax deductibility of your gifts.

Keep the Calendar in Mind

For tax purposes, donations made by check can usually be deducted if they are postmarked by December 31; however, if you are making a large donation, check with a tax advisor since industry practices often dictate that checks must be received by the charity and cashed before the end of the year. The IRS requires donations in excess of $250 to be documented more extensively, and you must provide the name of the organization, donation amount, and whether you received any goods or services from the charity in exchange for the donation.

Online donations are processed instantly. You may want to consider making last-minute donations by credit card instead of by check if you are concerned about the timing of your gift. (*Eight Tips for Deducting Charitable Contributions by the IRS)

Avoid Giving Cash

In order to deduct charitable gifts on your taxes, all donations must be substantiated by a receipt, cancelled check, or written acknowledgement by the charity (*Eight Tips for Deducting Charitable Contributions by the IRS). If you frequently give cash to organizations that solicit in front of supermarkets, malls, or local stores, you may be losing out on a major deduction. Consider supporting these organizations by writing a single check or asking for a receipt for each cash donation.

Consider Alternative Sources of Gifts

Not all donations need to come from your checking account. If you are subject to Required Minimum Distributions (RMD) from your IRA, you can still make qualified charitable donations (QCD), which will count towards your annual RMD amount and will also be excluded from your 2013 taxable income. IRA owners can distribute and exclude from their income up to $100,000 in direct donations to qualified charities – typically, those that meet IRS 501(c)(3) regulations. The QCD provision will expire at the end of 2013 unless Congress takes action to extend it.(*Charitable Donations from IRAs for 2012 and 2013 by the IRS) Another option for taxpayers is to give appreciated securities, which will qualify for tax deductions at their full fair market value.

Give Locally

One of the best ways that you can make an impact in your community is to donate to local organizations or community foundations. Community foundations focus on local needs and can help you identify those areas and show you how to make the greatest impact with your gift. Even small contributions can make a big difference to charities like food banks, homeless shelters, and animal welfare groups. In addition, many community foundations now have donor-advised funds that can help simplify the donation process. (If you live in the Findlay, Ohio area, you will want to check out The Findlay Hancock County Community Foundation)

Research Charities Carefully

New charitable organizations open their doors every day, and it’s wise to scrutinize potential gift recipients carefully before making a donation. Online tools like or are a great way to check out the legitimacy of organizations and ensure that your donations will be used as promised. It’s usually wise to avoid donating to organizations that rely on paid fundraisers since those (for-profit) fundraising firms often receive a significant percentage of the funds donated.

Best practices for charitable giving:

  • Clarify your beliefs and donation objectives
  • Research organizations carefully to ensure legitimacy and tax status
  • Make sure their mission aligns with your values
  • Give proactively (not necessarily in response to appeals)
  • Avoid the middleman and make donations directly to the organization or foundation of your choice
  • Trust your instincts
  • Don’t give cash and always document your donations
  • Consider developing a long-term relationship with charities that are a good fit for your values


We encourage our clients to give when they can. In the words of Winston Churchill: “We make a living by what we get. We make a life by what we give.” We hope that you’ve found this letter useful in helping maximize the value and impact of your philanthropy.

If you have any questions about the information we’ve presented or would like more information about charitable giving, please contact us, we’d be delighted to lend a hand.