IRA AND PENSION CONTRIBUTION

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IRA AND PENSION CONTRIBUTION


Q: I have some extra money set aside and have made my estimated tax payments. Should I wait until tax time to make my IRA contribution?

A: Make your IRA contributions now.  Don’t delay making contributions.  Deposit the full amounts now, AND START EARNING TAX-DEFERRED INCOME SOONER.

For the 2017 tax year, you can contribute $5,500 to a deductible IRA or non-deductible Roth IRA ($6,500 if you are age 50 or older by year-end). You can also do the same amounts for your spouse, called a Spousal IRA.

If you have your own business and do not have a pension plan, and you would like to contribute more than the IRA allows, consider opening a UNI, or Sole or one person 401K Plan.  If you have no full-time employees with the exception of your spouse, you are eligible for an owner-only 401K regardless of whether you operate as a sole proprietor, a partnership, a corporation or a limited liability company.  Multiple owners also qualify. The plan offers the advantage over traditional retirement programs for the self-employed by enabling you to put more money toward your retirement.

Q: If I move in with a man to whom I’m not married, and contribute to the mortgage payments on his house, can I deduct the share of the mortgage interest I pay?

 A: To be able to deduct mortgage interest, you must be legally obligated to pay the mortgage. Unless your name is on the mortgage, usually the answer is no.

Q:  I’m keeping track of my deadhead miles so at tax time I can deduct my lost income.  Is this correct?

A: A common misconception concerns deadhead miles.  There are many owner-operators and tax preparers who think that income lost as a result of deadhead miles is a deductible item.  That is not the case.  Only the cost to operate the truck, i.e. fuel, repairs, and maintenance covering those deadhead miles is deductible.  Additionally many truckers often ask whether doing their own maintenance is a deduction.  You cannot deduct your time for working on the equipment.  Even though you’re not able to deduct your time the benefit is that you are saving the cost of having someone else do the work.

Q: May I deduct my home improvements and repairs to my home?

A: No, home improvements can add to the value of your home and prolong its useful life. But  the cost of improvements are added to the basis of your property.  Examples of improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, putting on a new roof, or paving your driveway.  Repairs done to maintain your home in good condition do not add to its value or prolong its life and, therefore you do not add their cost to the basis of your property.  Some examples of repairs include repainting, new carpeting, and fixing rain gutters.

Note: You can get a solar energy credit up to 30% of the cost of qualifying improvements off your federal income tax return. You need to make sure the equipment qualifies for the credit before you purchase and install.

Q: I do not keep receipts for some of the less expensive business items I use on a regular basis, such as miscellaneous maintenance or repairs. I usually estimate additional amounts. Is this ok?

A: Yes, but there must be sufficient evidence to satisfy without a doubt that an amount was incurred for the stated purpose. You would have to apply the “Cohan Rule”.  Under the Cohan Rule, a taxpayer may use estimates when an exact amount could not be determined. If the taxpayer can make a reasonable evidentiary basis for the deduction, it is allowed. However, we recommend you keep all receipts and make any purchases using your debit or credit card.