Simpler Home Office Deduction for Self Employed

If you work at home or have a home-based business you should be aware of the new simpler option for calculating the business-use-of-home deduction. The new option makes record keeping easier as you will no longer be required to list specific home expenses. Instead a standard rate per square foot may be claimed up to 300 square feet ($1500.00)

The new method allows you to take the full interest and tax deduction on Schedule A, but it does not allow a depreciation deduction nor does it allow loss carryovers. If you want to avoid depreciation deduction recapture on selling the home, electing the simplified deduction is a way to do so.

Emily Acevedo
Health Savings Accounts are still a great investment.
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With the implementation of the Affordable Care Act taxpayers are choosing among bronze, silver, gold and platinum plans and while platinum plans have no deductible the more affordable plans can have high deductibles. making them compatible with a Health Savings Account (HSA). High deductibles for 2016 are 1300 for individuals and out of pocket maximum is 6550. For a family plan a high deductible is 2600 and out of pocket maximum is 13,100. If your plan qualifies you may make a deductible HSA contribution of 3350 for an individual plan or 6500 for a family plan. Unlike similar above the line deductions this does not phase out for high earners. However you do not qualify if you have another insurance that is not a high deductible plan and you can't contribute to an FSA and an HSA in the same year.

Contributions to an HSA are much like an IRA. The "above the line" deduction is taken from your adjusted gross income and not on Schedule A where it may be limited. Investments are allowed to grow tax free and distributions for qualified medical expenses are not taxable. Taxpayers may therefore use an HSA to pay ongoing medical bills and accrue income on the unspent balance. After reaching medicare age funds may be withdrawn, but early distributions that are not for qualified medical expenses are subject to a 20% penalty.

There is still time to take advantage of the deduction for 2016: Contributions for 2016 tax year may be made up to April 18, 2017.

Emily Acevedo
New Due Dates for 2017- Partnerships are due earlier.

Under new law there have been several changes to due dates for some federal tax returns which are effective for the 2017 filing season. Some entities must file earlier for 2017 while others were provided later due dates. The new dates are intended to allow for earlier access to K-1s. Both pass through entities are now due earlier, which makes for a much more logical and efficient order of preparation. New Mexico will follow federal due date date changes so federal and state may consistently be filed together.

Returns with earlier due dates are Form 1065 Partnership return now due March 15 instead of April 15 with fiscal year partnerships due the 15th day of the third month following year end.

FinCen Report 114 (FBAR) now due April 15 instead of June 30, however for the first time, taxpayers will be allowed an extension to October 15. This extension is automatic! The automatic extension in effect pushes the filing date up to October 15.

C Corporations form 1120 is now due later: April 15 instead of March 15. In most cases fiscal year corporations are now due the 15th day of the fourth month after the year end. New Mexico will follow these federal changes allowing you to file both returns at the later date.

There will be no change to individual income tax returns 1040 or to S-Corporations Form 1120-S

In sum, since Partnerships face harsh penalties for late filing (195.00 per month late) and failure to timely provide K-1s to each partner (260.00 per partner), they will be the most affected. It's highly recommended to complete partnership financial information earlier in order to be ready for the coming tax season.

Emily Acevedo