Tax Credits and the New Health Care Bill

The health care exchanges are being rolled out on October 1^st and 50 million people will be encouraged to go to the exchanges to obtain coverage. Upon the roll out of the exchanges there are 5 developments that you need to consider:

• What is an exchange? Where do you purchase coverage?

An exchange is an online marketplace where individual and small group consumers will be able to go online to shop for and purchase health insurance plans. Individuals and small business owners can access the exchanges through navigators, government websites, or independent brokers. Many brokers, like Newtek Insurance Agency, are appointed on the exchange and with private markets. This will help line up the coverage options and differences between the exchanges options, and what is available in the private market.

• How do the subsidies work?

If you do not meet certain income requirements then the federal government will give you a tax break / subsidy to purchase health insurance. As a consumer, you can choose one of two ways to accept your tax credits:

• You can accept an estimated credit that will lower your health insurance premiums by a set amount each month. The actual amount of the credit will be settled out when the individual’s taxes are filed.
• You can pay the monthly premium in full, and then deduct the amount of the coverage from your yearend tax return.

• What will the coverage look like?

The plans available on the exchange will have metallic coverage levels consisting of catastrophic, bronze, silver, gold, and platinum. Please see our next blog post “Understanding Exchange Plan Options” to be posted tomorrow.

• What is not included?

Ancillary lines of coverages are not included. Many people are used to having the option to buy dental, vision, life and disability coverages with their health insurance. These coverages will not be available through the exchange.

• Is there a benefit to the exchange plan?

If you are unable to afford coverage in the private market then the exchange options are a great value. They will provide individuals, the opportunity to purchase some form of health insurance coverage, whom would otherwise not be able to due to cost.

Thank you to Forbes.

How to file taxes, Home Office Tax Break

Because Home Office deductions can be used to lower your tax liability, considerably, the IRS often times reviews these types of returns for audits.  The best way to ensure that you will be OK, if the IRS decides to ask questions, is to keep accurate and GOOD records.  If you do this one task, you can help protect yourself, not from an audit, but from the IRS being right in an audit.

 

Read what the IRS has said and know that you CAN deduct a Home Office, even if you have an Employer. 

 

Our advise is that you employ a tax professional who has experience in Schedule C tax returns.  Its not enough for a Tax Preparer, CPA, Enrolled Agent or Tax Attorney to have experience in Corporate or Individual tax returns, they need extensive experience in Schedule C tax returns.

 

 

Home Office Deduction: a Tax Break for Those Who Work from Home

 

If you use part of your home for your business, you may qualify to deduct expenses for the business use of your home. Here are six facts from the IRS to help you determine if you qualify for the home office deduction.

1. Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. In addition, the part of your home that you use for business purposes must also be:

 

• your principal place of business, or

• a place where you meet with patients, clients or customers in the normal course of your business, or

• a separate structure not attached to your home. Examples might include a studio, workshop, garage or barn. In this case, the structure does not have to be your principal place of business or a place where you meet patients, clients or customers.

 

2. You do not have to meet the exclusive use test if you use part of your home to store inventory or product samples. The exclusive use test also does not apply if you use part of your home as a daycare facility.

 

3. The home office deduction may include part of certain costs that you paid for having a home. For example, a part of the rent or allowable mortgage interest, real estate taxes and utilities could qualify. The amount you can deduct usually depends on the percentage of the home used for business.

 

4. The deduction for some expenses is limited if your gross income from the business use of your home is less than your total business expenses.

 

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. Report your deduction on Schedule C, Profit or Loss From Business.

 

6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience.