Heading into a new tax year there important things to remember when filing with the IRS. Each year, the IRS makes changes to the tax code that can cause a plethora of troubles for even the most seasoned person attempting to file their own taxes. With that in mind, here are 5 new and improved deductions that will make your life a little easier when having to deal with Uncle Sam.
First, among the new deductions in the December budget deal was a provision that alters the tax treatment of hard apple cider. This new tax break for hard cider is aimed at businesses with special backing from constituents in apple-growing states such as New York, and states with a significant concentration of cider producers such as Oregon. The new break comes at a cost of $12 million over 10 years, according to the New York Times. It increases the permissible alcohol and carbonation levels for the popular apple drink, which reduces the excise tax on some products that exceed such levels.
Second, the new Small-Business Equipment Deduction. Under the new deduction, small businesses can deduct up to $500,000 annually for expenses of machinery, office equipment and computer technology.
Third, increase personal deductions. In addition to new tax benefits, a number of existing tax benefits are also becoming more valuable. The most useful of these is actually an exemption rather than a deduction for everyone. The IRS states, “The personal exemption for tax year 2016 rises $50 to $4,050, up from the 2015 exemption of $4,000. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $259,400 ($311,300 for married couples filing jointly). It phases out completely at $381,900 ($433,800 for married couples filing jointly.)” This exemption benefits all taxpayers by directly lowering taxable income by $50, making it a sort of belated Christmas present for all.
Fourth, the improved Schoolteacher Expense Deduction. For 2016, teacher expenses are eligible for an above-the-line deduction for schoolteacher expenses, up to $250. As part of the year-end budget deal, this amount will be adjusted for inflation in future years. Also, beginning in 2016 these schoolteacher expenses are expanded to include professional development expenses such as conferences and classes. The deductions apply only to people working in elementary or secondary settings, not colleges or universities.
Fifth, the Enhanced Parking Deduction. In many major cities, transportation to and from work is a big cost for employees. The deduction for transportation cost has not changed this year and remains at $130 per month. However, a related benefit for parking at work has increased. For tax year 2016, the monthly limitation for the qualified transportation fringe benefit rises to $255 for qualified parking, up from $250 for tax year 2015.
So for those individuals who qualify for these new deductions, it could mean less out of pocket costs owed to the IRS, making this tax season a little more bearable.