| 14 Deductions You Might Miss |
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Page 2 of 2 Insurance premiums Don't
forget that unincorporated physicians (and those in S corporations) can
deduct 100 percent of health insurance premiums for themselves, their
spouse, and their dependents. You might also
be able to deduct premiums for long-term-care policies, says CPA Ronald
J. Knueven of Clayton L. Scroggins Associates in Cincinnati. The
premiums are considered medical expenses, so they're 100 percent
deductible if you're self-employed. The size
of your writeoff depends on your age at the end of the year. For 2005,
you can deduct: $270 if you're age 40 or younger, $510 for those age 41
through 50, $1,020 for those age 51 through 60, $2,720 for those age 61
through 70, and $3,400 for those over age 70. Corporate charitable contributions Your
accountant undoubtedly knows that charitable deductions on the return
for your C corporation can't exceed 10 percent of the corporation's
taxable income. But you might be able to get around this limit if
you're able to reclassify certain donations. For instance, say you're a
cardiologist who's made a large contribution to a campaign that the
American Heart Association is promoting. Do you expect to receive some
future benefit from the donation, such as attracting new patients? If
so, ask your accountant if the expense can be classified as
"advertising and promotion"—which is 100 percent deductible. Personal charitable contributions Accountants
tell us that doctors frequently overlook gifts of personal property
such as used clothing, furniture, or household appliances. These
qualify as charitable contributions, too. Just keep in mind that your
writeoff is limited to the items' fair market value, which is usually
much less than your original cost. Other
often-overlooked charitable deductions: out-of-pocket expenses incurred
in rendering services to a charitable organization and mileage you put
on your car for charitable work. You can deduct 14 cents per mile. If
you used your car for Hurricane Katrina relief between Aug. 25 and Aug.
31, 2005, you can deduct 29 cents per mile, or, if it was between Sept.
1 and Dec. 31, 2005, you can deduct 34 cents per mile. College expenses Did
your college-age children pay for any educational expenses from their
own funds? While you may not be able to take advantage of higher
education credits since they phase out as modified adjusted gross
income rises from $43,000 to $53,000 for single filers or $87,000 to
$107,000 for married filing jointly, your child may able to if she
isn't a dependent for whom you can claim a deduction. Ask your
accountant if your child is eligible for the Hope credit ($1,500 a
year) or the lifetime learning credit (up to $2,000 for 2005). The Hope
credit can only be taken twice and it's only available until the first
two years of college or vocational school are completed. Summer camp If
both you and your spouse work, do you send your children who are under
13 to day camp? These expenses are eligible for the child and dependent
care credit, points out CPA Mary McGrath of Cozad Asset Management in
Champaign, IL. "Many doctors don't think of this as child care and
forget to mention it," she says. A spouse's IRA contribution On
the other hand, if your spouse doesn't work or isn't an active plan
participant in an employer-sponsored retirement plan, you may be
overlooking a way to build your retirement funds and get a deduction,
at the same time. If your joint modified adjusted gross income is
$150,000 or less, your spouse can make a fully deductible contribution
to a traditional IRA. (The deduction phases out as your income rises to
$160,000, and it's completely nondeductible at $160,000.) Missed
the boat? You can still make a 2005 IRA contribution (of $4,000 or
less) for 2005 through April 17. You can add another $500 to your
contribution if you're 50 or over. A SEP for outside earnings Did
you receive any outside income last year, like from a drug company or
for your time spent giving testimony in court? Assuming the income was
paid to you personally and not to your practice, you can set up a
Simplified Employee Pension based on this personal compensation. You
have until the due date of your return (including extensions) to set up
the SEP and make a tax-deductible retirement plan contribution. Your
maximum contribution for 2005 would be $42,000. Mortgage refinancing If
you refinanced your mortgage last year, you can write off any
unamortized points from the previous mortgage, says McGrath. These are
points that you had been deducting over the life of the previous loan. Clean-fuel cars With
gas prices hitting new highs in 2005, some physicians bought hybrid
gas-electric vehicles to reduce consumption of gasoline. This entitles
them to a maximum clean-fuel deduction of $2,000. The models that
qualify are the 2005 Toyota Prius, Ford Escape Hybrid, Honda Insight,
Honda Civic Hybrid, and Honda Accord Hybrid. The 2006 model-year
vehicles certified by the IRS are the Ford Escape Hybrid, the Mercury
Mariner Hybrid, the Toyota Highlander, and the Lexus RX 400h. You can
claim the deduction only if you're the car's original owner and you can
only take it for the year you first use the car. Travel and entertainment North
Carolina CPA Richard Blum finds that doctors often combine expenses for
travel, meals, lodging, entertainment, and continuing education into a
single category: "travel and entertainment." Because of this, the
doctor's CPA may mistakenly deduct 50 percent of the total amount (the
allowable deduction for business meals and entertainment), even though
some individual expenses are 100 percent deductible. These fully
deductible expenses include business travel; lodging; continuing
education; and activities for the benefit of nonhighly compensated
employees, such as staff meals, outings, and holiday parties. You can
avoid this error by using separate expense classifications for them in
your records. Written by Kathleen McKee, Medical Economics Magazine For more information on the author and additional articles from Medical Economics Magaine please visit http://www.memag.com/memag/author/authorInfo.jsp?id=16498. |
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