Job-related Education Expenses

Job-related education expenses may be able to be deducted as an itemized deduction on your individual return. The expenses must be for education that maintains or improves your job skills or is required by your employer or by law to keep your salary, status, or job.

The education cannot qualify you for a new trade or business or be taken to meet the minimal educational requirements of your current trade or business.  Undergraduate degree costs do not qualify because they are usually incurred to meet the minimum educational requirements. Costs of obtaining a graduate degree usually qualify if the education area is related to your current job.

Expenses that can be deducted include tuition, books, supplies, lab fees, and transportation and travel costs.

Indiana’s Identity Confirmation Quiz

No, this is NOT a scam. There has been a tremendous increase in the number of victims affected by identity theft and tax fraud.  Most taxpayers do not know they are a victim until they submit a tax return and discover that someone else has already submitted a return using their name and social security number. In an effort to fight identity theft, the Indiana Department of Revenue has implemented a new identity protection program. This program went into effect during the 2014 tax season and will continue through the next season.

Taxpayers that have irregularities in their information will be asked to confirm their identities through the Identity Confirmation Quiz. At this time, only 5 percent of Indiana taxpayers have been selected. Selected taxpayers will receive an official letter from the Department of Revenue with instructions for completing the quiz.  The quiz is 4 questions and can be taken on a secure website in 2 minutes or less.

The End of Uncomplicated Health Insurance Coverage for Employees

Before 1/1/2014, small businesses had tremendous flexibility in how they compensated their employees with health insurance coverage.  Most small businesses didn’t want to establish a group health insurance plan and so would reimburse some or all employees for the employee’s individual health insurance premiums.

Various provisions of the tax code allowed small businesses to 1.) pick and choose which employees they wanted to compensate in this manner (i.e., discriminate), and 2.)reimburse the employee for their health insurance premiums on a pre-tax basis (i.e., the employer could give the employee money and the employee wouldn’t be taxed on it).

An IRS Notice issued at the end of 2013 put an end to this.  The discrimination rules have tightened up and you can no longer reimburse employees for their individual health insurance premiums on a pre-tax basis.

Starting 1/1/2014, the only way for an employer to help pay for some of the employee’s health insurance premiums in a manner that doesn’t create taxable compensation to the employee is to establish a group health insurance plan under the employer and then pay for some or all of the employee’s group health insurance premiums.

Creative Gifting

Gifting allows flexibility to shift income or deductions between individuals.  I will briefly mention 2 gifting strategies:

  • Presume that you are don’t have enough itemized deductions to itemize, and are in a low tax bracket.  If you want to make a donation to a charity but can’t benefit from the deduction, then gift the funds to a friend who can benefit from the deduction.  The friend can make the donation to the charity and utilize the deduction.  In order for the gift to be legitimate, you can have no control over the money once you make the gift to your friend.  If the friend decides not to donate it, there’s nothing you can do – except leave that friend off of your Christmas card list.
  • Presume that you want to gift money to your child to use as a down-payment on their house.  Instead of gifting cash, you can gift appreciated securities to your child.  The child will sell the appreciated securities and be taxed on the gain at their lower tax bracket.  As the stock market continues to heat up, this may be a timely strategy to get some gains off of your plate.