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Tax Cuts and Job Act of 2017

Tax Deductible Business Related Expenses for Sole Proprietors

  • Accounting and Tax Preparation Fees
  • Board Fees and Board Review Courses
  • Business Gifts (limited to $25 per gift per person)
  • Cell Phone and Mobile Apps
  • Cleaning/Laundry of Medical Uniforms
  • Computers and Related Supplies
  • Continuing Medical Education (CME)
  • Conferences and Conventions
  • Dues to Medical Associations
  • Legal and Professional Fees
  • Malpractice Insurance
  • Medical Books and Journals 
  • Medical Equipment and Supplies
  • Medical License and DEA Fees  
  • Medical Uniforms 
  • Telephone/Fax/Internet Access 
  • Auto Expenses
    • Standard Mileage Rate - 54.5¢ per business mile for 2018
    • Auto Lease Payments
    • Car Washes & Detailing
    • Gas & Oil
    • Insurance
    • Repairs & Maintenance
    • Registration
    • Tires
  • Meals
    • 50% Deductible when business related
    • 50% Deductible when away on over-night travel
  • Travel
    • At least 24 hours away from home
    • Transportation and lodging expenses related to business are 100% tax deductible

Student Loan Interest Deduction

  • Individuals may deduct up to $2,500 of interest paid in the current year on student loans 
  • Student loan interest is deducted as an Adjustment to Income on Form 1040
  • Voluntary interest payments are tax-deductible
  • Limited to the first 60 months for which interest payments were required
  • Phase-out (Adjusted Gross Income - AGI)
    • Single    Taxpayer $ 65,000 - $80,000
    • Married Taxpayer $135,000 - $165,000

Personal (Federal) Income Taxes

  • Income Tax Rates for 2018:

     

    10%

     

    12%

     

    22%

     

    24%

     

    32%

     

    35%

     

    37%

    Married Filing Jointly

    0 - $19,050

    $19,050 - $77,400

    $77,400 - $165,000

    $165,000 - $315,000

    $315,000 - $400,000

    $400,000 - $600,000

    Over $600,000

    Married Filing Separately

    0 - $9,525

    $9,525 - $38,700

    $38,700 - $82,500

    $82,500 - $157,500

    $157,500 - $200,000

    $200,000 -  $300,000

    Over $300,000

    Head of Household

    0 - $13,600

    $13,600 - $51,800

    $51,800 - $82,500

    $82,500 - $157,000

    $157,000 - $200,000

    $200,000 - $500,000

    Over $500,000

    Single

     

    0 - $9,525

    $9,525 - $38,700

    $38,700 - $82,500

    $82,500 - $157,500

    $157,500 - $200,000

    $200,000 - $500,000

    Over $500,000

  • Standard Deduction

     

    Standard Deduction

     

    Personal Exemption (Eliminated)

    Married Filing Jointly

    $24,000

    n/a

    Married Filing Separately

    $12,000

    n/a

    Head of Household

    $18,000

    n/a

    Single

    $12,000

    n/a



  • Itemized Deductions include:
    • Medical and dental expenses (subject to 7.5% of AGI limitation)
    • State and local taxes (capped at a combined $10,000 for income, sales, and property taxes)
    • Home mortgage interest (up to $750,000 of mortgage debt incurred to buy or improve a first or second residence)
    • Charitable contributions - cash and noncash

  • Adjustments to Income include:
    • Individual Retirement Account (IRA) contributions
    • Student loan interest
    • One-half self-employment tax
    • Self-employed health insurance
    • SEP IRA contributions

FICA Taxes

FICA 6.20% OASDI tax is computed on the first $128,400 of 2018 income. The 1.45% Medicare tax is computed on total wages, without a ceiling. Starting in 2013, there will be an additional 0.9% Medicare tax on wages above $200,000 for individuals and $250,000 for married filing jointly.

Also starting in 2013, there is a new Medicare tax of 3.8% on investment (unearned) income for single taxpayers with modified adjusted gross income (MAGI) over $200,000 ($250,000 joint filers). Investment income includes dividends, interest, rent, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts, and self-employed individuals are all liable for the new tax.

Traditional IRA Deductibility Phase Out Ranges for 2018 (if covered by a retirement plan at work)

 

Tax Year



 

Adjusted Gross Income Single Filer



 

Adjusted Gross Income Married Filing Jointly



2018

$63,000 - $73,000

$101,000 - $121,000

Record Keeping

  • Set up a filing system
  • Consider using a designated credit card for only business related expenses. Request an annual summary statement each year.
  • Digitize documents whenever possible, i.e. bank and investment statements, credit card statements, etc.
  • Shred documents you don’t need
  • Maintain financial records for seven years
  • Maintain a mileage log or mobile app to keep track of moonlighting activities, business meals and travel, automobile mileage, etc.
  • Meals and Entertainment - document business purpose and relationship of parties for all transactions
  • Consider setting up a separate checking account for business purchases and expenses  

Independent Contractor Status

  • No taxes are withheld by employer
  • Net income is subject to self-employment tax of 15.3%
  • Contractor may be required to make quarterly estimated tax payments:
    • 1st Quarter - April 16, 2018
    • 2nd Quarter - June 15, 2018
    • 3rd Quarter - September 17, 2018
    • 4th Quarter - January 15, 2019

Coverdell Education Savings Accounts

  • Maximum $2,000 per year contribution per child
  • Contributions are not tax-deductible
  • Account growth is tax-free
  • Account must be used for higher education purposes by age 30
  • Phase-out (Adjusted Gross Income - AGI)

    • Single    Taxpayer $  95,000 - $110,000
    • Married Taxpayer $190,000 - $220,000

Limitations and restrictions apply. Tax rules are subject to change. This is for informational purposes only. Individual situations will vary. Please speak with a qualified tax advisor for information specific to your situation.