HERITAGE PLUS FINANCIAL, INC. - An Alliance of Professionals - Income Tax, Business, Financial, Legal

Heritage Plus Financial, Inc.
13211 Jones Road
Houston, TX  77070
Office: (281) 894-0499
Fax: (281) 890-1329

Tax Tips

One of the many benefits of working with Heritage Plus Financial is having experienced professionals to ensure all of your decisions will incur the least tax liability and maximum tax savings. 

Here are a few Tax Tips which may be helpful to you.  All are contingent upon the current tax law.  There is much more than this, of course, and if you need help, we hope you’ll contact us.

Tax Tips for Businesses

Deductible Home Office
If you use a portion of your home, exclusively and regularly for business purposes, whether you are self-employed or an employee, you may be able to take a home office deduction.

Charitable Contributions
Your donations can add up to a nice tax deduction if you itemize.

Being self employed, what sort of deductions can I take?
You should be able to make an immediate expense deduction, for equipment and supplies used in your business. Health care is deductible, contingent upon the new law, as are retirement accounts such as the SEP, Keogh and SIMPLE plans.

Are there limits on deductible entertainment, travel and meal costs?
Although there is no specific dollar limit, expenses should be ordinary and necessary and not over-generous.  The deduction cannot exceed a certain percentage of the cost of business entertainment and meals.  For skyboxes and luxury water travel, there are other specific limitations.

Is it possible to deduct living expenses when I am on temporary assignment away from where I live and work?
Because temporary work site living expenses are separate from home travel expenses, they may be deducted.  An assignment that is not expected to last more than a year is considered temporary. If the assignment is for more than one year, then the new area becomes your tax home and you can't deduct expenses as away-from-home travel.

What can I deduct as expenses when I am traveling away from home?
There is a broad range of expenses that you can deduct while traveling. The most common are as follows:

  • Accommodation and percentage of meals
  • Transportation fees or actual costs at a per-mile rate for using your own vehicle. The transportation costs also include getting around in the work area, commuting to and from hotels, restaurants, offices, terminals, etc.
  • Phone, fax, laundry, baggage handling
  • Any tips related to the above

Are there expenses that cannot be deducted as travel expenses?
The travel expenses below cannot be deducted:

  • Travel as education
  • Looking for a new job in a different field or for a new business site
  • The cost of transportation between your home and the work site unless your home is your business headquarters.

What business entertainment can I deduct?
The conditions and limitations for business and entertainment deductions are the following:

  • A business discussion should be held before, during, or after the entertainment.
  • Usually, the deduction is limited to a percentage of the cost for entertainment and meals.
  • In settings where spousal attendance is customary, expenses of spouses of business associates (and your own spouse) may be included in the deduction.
  • There are more limitations for club dues, entertainment facilities and skyboxes.

What other ways can I defer this year's income?
If you own your business you may want to postpone sending certain invoices to ensure that you will receive payment in the following tax year. This can help greatly if some of this income would push you into a higher tax bracket. You may want to accelerate paying for expenses to cover your taxes in the current year.

Tax Tips for Finance

There are yearly beneficial tax law changes.  Our tax preparer can help you save money on taxes, allow you to have more control over your money, and plan well to increase money with projections.

Please give a call to us to schedule an appointment to speak in specifics of your situation, so we may implement the best plan of action for you.

If I have a large capital gain this year, what can I do?
If you have a large capital gain this year from an investment, it may be advisable to hold onto the investment until next year to put the gain into next year's taxes. You may also want to sell off any investments that you have that are losing value at the moment to claim your losses.

What investments can I make to help defer taxes?
The interest gained from state and local bonds is usually exempt from federal income taxes. These investments generally pay back at a lower interest rate than commercial bonds of similar quality.

What retirement plans are available to aid in the deferral of taxes?
You have the ability to invest some of the money that you would have paid in taxes to add to your retirement fund. Many employers will offer the opportunity to defer a portion of your earnings and contribute them directly to your retirement account. Some of them may even match a portion of your savings. If this is the case, it is always advisable to save at least the amount that your employer will match. This will give you an automatic 100% gain on your money.

Capital Gains and Losses
Almost everything you own and use for personal purposes, pleasure or investment, is a capital asset. The IRS says when you sell a capital asset, such as stocks, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only your capital losses on investment property, not personal property.

IRA Contributions
You may contribute to either a traditional or Roth IRA until the April 15 due date for filing your tax return for last year, not including extensions, if you haven’t contributed funds or contributed less than the maximum allowed.

There are a variety of tax credits, deductions, and savings plans available to taxpayers to assist with the expense of higher education of your children.  It is best to consult with our professionals to determine which would be the most advantageous and the current tax law.

  • A tax credit reduces the amount of income tax you may have to pay

  • A deduction reduces the amount of your income that is subject to tax, thus generally reducing the amount of tax you must have to pay:
    • Tuition and fees deduction
    • Student loan interest deduction
    • Business deduction for work-related education

  • Certain savings plans allow the accumulated interest to grow tax-free until money is taken out (known as a distribution), or allow the distribution to be tax-free, or both.

  • Scholarships and Fellowships

  • An exclusion from income means that you won’t have to pay income tax on the benefit you’re receiving, but you also won’t be able to use that same tax-free benefit for a deduction or credit:
    • Employer-Provided Educational Assistance

What is a qualified tuition program?
The Section 529 is a college savings program available in most states. Money is invested to cover the costs of future education. These investments grow tax free and the distributions may also be tax-free.

May I withdrawal money from my traditional or Roth IRA to help fund my child's education?
Yes, you may withdrawal a certain percentage without paying penalties. However, you may pay ordinary income tax on a portion of your withdrawal.


After marriage, what are the tax implications?
You are entitled to file a joint income tax return upon marriage. Although this simplifies the filing process, you will more than likely discover that your tax bill is either higher or lower than when you were single. It's higher when you file together, as more of your income is taxed in the higher tax brackets. This is commonly known as the marriage tax penalty. In 2003, a tax law that intended to reduce the marriage penalty went into effect, but this law didn't get rid of the penalty for higher bracket taxpayers.

Once married, you may not file separately in an attempt to avoid the marriage penalty. Actually, filing as married, but filing separately can raise your taxes. For the optimal filing status for your situation you should speak with your tax advisor.

With a divorce, what are the tax implications?
Upon completion of a divorce, individual tax returns will be filed. There are a few areas that may result in tax consequences. The following are the most common:

  • Child Support
    It is not taxable to the recipient and is not deductible by the payer. If it is specially designated as child support in a divorce agreement or lessened by the occurrence of a contingency relative to the child, meaning a child reaches a specified age, it is considered as a payment.
  • Alimony
    It is taxable to the recipient and deductible by the payers. It is known as a payment in accordance with a divorce agreement other than child support or when allocated in the decree as something other than alimony. In a separation agreement, similar treatment is in accordance with separate maintenance payments. Payments may not end upon death of the recipient and may not be front-loaded.
  • Property Settlements
    When in accordance with the divorce or separation, they are not taxable. In the event of transfers of assets among spouses, they do not become taxable income, gains, losses, or deductions. The recipient spouse gets the cost basis of the property. Your spouse may provide you with an equal share of the property based on a fair market value, but be careful with the lower basis. In the end, it can produce a taxable gain at the asset's sale.

Is it possible to financially prepare for divorce?
A plan for the termination of the financial partnership of the marriage is crucial if you are thinking of divorce. All financial assets and liabilities that have been acquired during the years of marriage will need to be divided. If children play a role, the support that will be paid to the custodial parent in the future should be taken into account.

  • Prepare an inventory of your financial situation
  • Prepare a list of all assets, whether joint or separate, that includes:
    • The value of any brokerage accounts
    • The current balance in all bank accounts
    • Copies of the last 2 or 3 years’ tax returns which will be beneficial later.
  •  Obtain all papers regarding insurance, life, health, pension, and other retirement benefits.

There are tax implications if retirement plans or IRAs are divided in a divorce. 
If in accordance with the qualified domestic relations order or other order of the court in the case of an IRA, these plans are separated as non-taxable. However, this is the case only if the assets stay in the retirement account or IRA. Once the funds are allocated, they will be taxed to the recipient. The payer does not get the benefit of a deduction and the recipient does not have taxable income when divided.

Am I entitled to deduct the dependency exemption of a child after divorce?
Typically, the custodial parent has the right to the deduction. This is normally discussed in divorce agreement negotiations. If agreed to in writing, the non-custodial parent may have the deduction.

Specific fees paid for income or estate tax advice due to the divorce may be deductible.
The fees used to decide the alimony amount or to collect the alimony may be deducted.

Upon a family member's death, what taxes are due?
The following sums up the different taxes that may need to be paid upon death of a family member:

  • Federal Estate Tax. Amounts that are given to the surviving spouse or to a charity are typically exempt from estate tax. Normally, the estate tax is only owed on estates (which, after decreasing the amount by what is given to the spouse and charity, surpasses the unified credit exemption equivalent).
  • Within nine months of the death, absent extension date, a federal estate tax return must be filed.
  • State Estate Taxes. These differ by state. States may enforce estate taxes that may be applied on top of the federal estate taxes while others may be utilized when federal estate taxes don't. There are inheritance taxes that some states impose, which are on the individuals that receive the inheritance, rather than on the estate itself.
  • Income Taxes. The deceased's state and federal income taxes are due for the year of death. Unless an extension is solicited, the taxes are due on the regular filing date of the coming year. For the year of the death, the deceased's spouse may file a joint federal income tax return. If the spouse has a dependent child, he/she may file for an additional two years.

In order to cut taxes, may I refuse property bequeathed to me by a member of my family?
To refuse all or part of the property that is being passed on to you by a will, intestacy laws or the operation of law, you should make use of the disclaimer. The property is passed to the next beneficiary in line with an effective disclaimer.

By the property passing directly from the decedent to the next beneficiary, it could possibly save thousands of dollars in estate taxes. The wise use of the a disclaimer and the condition for a disclaimer in a will permits the shifting of assets and income to maximize the estate tax marital deduction, unified credit and the lower income tax brackets.

To provide for financial contingencies, disclaimers may be useful. For instance, if someone needs funds, you can disclaim an interest to them.

My spouse died this year; may I file a joint return for this year?
Of course. If the surviving spouse didn't remarry before the end of the tax year, he/she may choose to file a joint return.

Do I have to pay taxes on the profits of a life insurance policy that is payable to me?
Typically not. Unless the recipient paid for the privilege to collect the life insurance policies, they are non-taxable income. For instance, if a policy was purchased as an investment.

Do I need to pay income taxes on the distributions from a retirement plan or IRA of the deceased?
Typically, yes, because it is considered income with regard to the decedent. The tax is due by the recipient because the deceased had not paid the distribution's income tax. You may be entitled to a deduction for a segment of the estate taxes paid, if the account's value was incorporated in the estate tax return of the decedent.

miscellaneous items
Earlier is better when it comes to working on your taxes.   The IRS encourages everyone to get a head start on tax preparation. Not only do you avoid the last-minute rush, early filers also get a faster refund.

Charitable Contributions
Your donations can add up to a nice tax deduction if you itemize.

Refinancing your Home
Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.

Foreign Income
With more and more United States citizens earning money from foreign sources, the IRS reminds people that they must report all such income on their tax return, unless it is exempt under federal law. U.S. citizens are taxed on their worldwide income.

Gift Giving
If you gave any one person gifts valued at more than a certain amount, it is necessary to report the total gift to the Internal Revenue Service. You may even have to pay tax on the gift.

Marriage or Divorce
Newlyweds and the recently divorced should make sure that names on their tax returns match those registered with the Social Security Administration (SSA). A mismatch between a name on the tax return and a Social Security number (SSN) could unexpectedly increase a tax bill or reduce the size of any refund.

Tax Tips for Taxpayers with Children

Dependents In most cases, a child can be claimed as a dependent in the year they were born.

Child Tax Credit You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. The Additional Child Tax Credit is a refundable credit and may give you a refund even if you do not owe any tax.

Child and Dependent Care Credit You may be able to claim the credit if you pay someone to care for your child under age 13 so that you can work or look for work.

Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child.

Children with Earned Income If your child has income earned from working they may be required to file a tax return.

Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate.

Record Keeping for Taxes

What do I need to keep for tax reasons?
It is a good idea to keep all of your receipts and records of your income and expenses. These will be very useful if you are audited. Keep these records for at least 7 years.

How should I separate and organize my expenses?

  • Income
  • Exemptions
  • Medical Expenses
  • Taxes
  • Business Expenses
  • Education
  • Travel
  • Auto

How long should I keep these documents?
Three to four years.

How long should I keep old tax returns?
If you are audited, it is very likely that the auditor will ask to see the last few tax returns. It is recommended to keep these tax returns forever.

What other records should I keep?
If you purchased goods that you plan to sell later, keep the receipts to calculate your gain or loss.

  • Anything regarding the property you own and any repairs that you perform
  • Receipts for any jewelry or other valuable collector's items
  • Records for capital assets, stocks, bonds, and such.