Charles Wilson, LLC | 307 S. Friendswood Dr, Ste B-2 | Friendswood, TX 77546 | 281-993-4530 | charlie@wilsonaccounting.net

 

Tax Effects of Divorce or Separation + Looking for Work May Impact Your Taxes + Home Energy Tax Credits Save You Money at Tax Time



  Tax Effects of Divorce or Separation
 

If you are divorcing or recently divorced, taxes may be the last thing on your mind. However, these events can have a big impact on your wallet.  Alimony and a name or address change are just a few items you may need to consider. Here are some key tax tips to keep in mind:.


> Child Support. Child support payments are not deductible and if you received child support, it is not taxable.

> Alimony Paid. You can deduct alimony paid to or for a spouse or former spouse under a divorce or separation decree, regardless of whether you itemize deductions. Voluntary payments made outside a divorce or separation decree are not deductible. You must enter your spouse's Social Security Number or Individual Taxpayer Identification Number on your Form 1040 when you file.

> Alimony Received. If you get alimony from your spouse or former spouse, it is taxable in the year you get it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.

> Spousal IRA. If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse's traditional IRA. You may be able to deduct contributions you make to your own traditional IRA.

> Name Changes. If you change your name after your divorce, be sure to notify the Social Security Administration. File Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov or call 800-772-1213 to order it. The name on your tax return must match SSA records. A name mismatch can cause problems in the processing of your return and may delay your refund. Health Care Law Considerations.

> Special Marketplace Enrollment Period. If you lose health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. You may enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period, if you lose coverage due to a divorce.

> Changes in Circumstances. If you purchase health insurance coverage through the Health Insurance Marketplace, you may get advance payments of the premium tax credit. If you do, you should report changes in circumstances to your Marketplace throughout the year. These changes include a change in marital status, a name change, a change of address, and a change in your income or family size. Reporting these changes will help make sure that you get the proper type and amount of financial assistance. This will also help you avoid getting too much or too little credit in advance.

> Shared Policy Allocation. If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf. Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation. For more on this topic, see Publication 504, Divorced or Separated Individuals. You can get it on IRS.gov/forms at any time.
 



   Looking for Work May Impact Your Taxes

If you are looking for a job in the same line of work, you may be able to deduct some of your job search costs.

 

Here are some key tax facts you should know about when searching for a new job:

 

> Same Occupation. Your expenses must be for a job search in your current line of work. You can’t deduct expenses for a job search in a new occupation.

> Resume Costs. You can deduct the cost of preparing and mailing your résumé.

> Travel Expenses. If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.

> Placement Agency. You can deduct some job placement agency fees you pay to look for a job.

> First Job. You can’t deduct job search expenses if you’re looking for a job for the first time.

> Time Between Jobs. You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.

> Reimbursed Costs. Reimbursed expenses are not deductible.

> Schedule A. You normally deduct your job search expenses on Schedule A, Itemized Deductions. Claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.

> Premium Tax Credit. If you receive advance payments of the premium tax credit, it is important that you report changes in circumstances – such as changes in your income, a change in eligibility for other coverage, or a change of address – to your Health Insurance Marketplace. Advance payments are paid directly to your insurance company and lower the out-of-pocket cost for your health insurance premiums. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

For more on job hunting refer to Publication 529, Miscellaneous Deductions. You can get IRS tax forms and publications on IRS.gov/forms at any time.
 



Home Energy Tax Credits Save You Money at Tax Time

Certain energy-efficient home improvements can cut your energy bills and save you money at tax time.

Here are some key facts that you should know about home energy tax credits:

> Non-Business Energy Property Credit

- Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.

- The other part of the credit is not a percentage of the cost. This part of the credit is for the actual cost of certain property. This may include items such as water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.

- This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.

- Your main home must be located in the U.S. to qualify for the credit.

- Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.

- You must place qualifying improvements in service in your principal residence by Dec. 31, 2016.

> Residential Energy Efficient Property Credit

- This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.

- Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.

- Qualified wind turbine and fuel cell property must be placed into service by Dec. 31, 2016. Hot water heaters and solar electric equipment must be placed in to service by Dec. 31, 2021.

- The tax credit for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity. The amount for other qualified expenditures does not have a limit. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return. • The home must be in the U.S. It does not have to be your main home, unless the alternative energy equipment is qualified fuel cell property.

- Use Form 5695, Residential Energy Credits, to claim these credits. For more on this topic refer to the form’s instructions. You can get IRS forms on IRS.gov/forms anytime.

Don't hesitate to call us if you need help or want to get started on tax planning for the remainder of 2016 or for 2017 already!  If you have comments or questions on the information in these articles, as usual feel free to call our offices.

 

 

 


 

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Regards, Charles S. Wilson, CPA/CFF, CGMA

Certified Public Accountant

 

 

 

 

Charles S. Wilson, CPA/CFF, CGMA | Charles Wilson, LLC | 307 S. Friendswood Dr, Ste B-2
Friendswood, TX 77546 | 281-993-4530 (O) | 866-567-3975 (F) | charlie@wilsonaccounting.net