Many expenses that may qualify as miscellaneous itemized deductions are deductible only to the extent they exceed, in aggregate, 2% of your adjusted gross income (AGI). Bunching these expenses into a single year may allow you to exceed this “floor.” So now is a good time to add up your potential deductions to date to see if bunching is a smart strategy for you this year.
If you go on a business trip within the United States and tack on some vacation days, you can deduct some of your expenses. But exactly what can you write off?
Last year a break valued by many charitably inclined retirees was made permanent: the charitable IRA rollover. If you’re age 70½ or older, you can make direct contributions — up to $100,000 annually — from your IRA to qualified charitable organizations without owing any income tax on the distributions.
It’s common for parents, grandparents and others to make gifts to minors and college students. Perhaps you want to help fund education expenses or simply remove assets from your taxable estate. Or maybe you’re hoping to shift income into a lower tax bracket. Whatever the reason, beware of the “kiddie tax.”
You can only deduct losses from an S corporation, partnership or LLC if you “materially participate” in the business. If you don’t, your losses are generally “passive” and can only be used to offset income from other passive activities. Any excess passive loss is suspended and must be carried forward to future years.
When the deductible expenses of a business exceed its income, a net operating loss (NOL) generally occurs. If you’re planning ahead or filing your income tax return after an extension request and you find that your business has a qualifying NOL, there’s some good news: The loss may generate some tax benefits.
Many businesses host a picnic for employees in the summer. It’s a fun activity for your staff and you may be able to take a larger deduction for the cost than you would on other meal and entertainment expenses.
The top alternative minimum tax (AMT) rate is 28%, compared to the top regular ordinary-income tax rate of 39.6%. But the AMT rate typically applies to a higher taxable income base and will result in a larger tax bill if you’re subject to it.