Tax developments of the past year that impact you

Your Guide to State, Local, Federal, Estate + International Taxation

tax developments, tax, IRS

“In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin

As certain as taxes are, the rules and regulations surrounding them are constantly being revised and updated. David DeJong, CPA, with Accounting Today keeps a running list of the top tax developments over the past 12 months, including legislative developments, court cases and IRS pronouncements. Here are a few of the tax developments that may impact your situation.

Alimony

According to the IRS, a payment is considered taxable alimony if certain requirements are met. One of the requirements is that there is no liability to make the payment after the recipient’s death. However, in Leslie v. Commissioner, TC Memo 2016-171, the Tax Court determined that $5.5 million received by a woman from her former spouse constituted taxable alimony although the documents did not indicate that payments stopped upon her death.

“Alternative” medications

If you itemize your deductions, you may be able to deduct expenses (that exceed 10% of your adjusted gross income) you paid for medical and dental care for yourself, your spouse and your dependents. Medications are an allowable expense; however, the deduction was limited to medications prescribed by a doctor. In Malev v. Commissioner, Bench Opinion in Docket No. 1282-16S, the Tax Court determined that integrative medical care costs, otherwise knowns as “alternative” medicine, are deductible on a subjected test of whether the individual believed that they may be effective. The Court stated that medical care must take into account the role that an individual’s state of mind plays in the treatment of disease.

Mortgage interest deduction

Taxpayers are permitted a deduction for interest paid on debt to acquire, construct, or substantially improve a taxpayer’s main or second home. For married filing jointly taxpayers, acquisition indebtedness is limited to $1,000,000 and home equity debt is limited to $100,000. In Action on Decision 2016-2, the IRS agreed with the Ninth Circuit Court of Appeals in Voss v. Commissioner, which held that the $1 million acquisition indebtedness and $100,000 home equity indebtedness maximums are a per-individual basis and not on a per-residence basis.

To see the full list of developments, click here.

Lauren J. Sweeney