Qualified Charitable Distribution (QCD):  In years past, seniors over the age of 70½  could elect to make a direct IRA-to-charity transfer, thereby avoiding the inclusion of their Required Minimum Distribution (RMD) in taxable income, minimizing the taxability of Social Security benefits, lowering Adjusted Gross Income (AGI) thresholds for various itemized deductions, and potentially avoiding the Medicare Surtaxes.  The QCD provision expired at the end of 2014 but was retroactively reinstated for the 2015 and permanently extended for 2016 and beyond!

Donor Advised Fund (DAF):  An account established at a public charity which gives donors the ability to make a current lump-sum contribution while postponing the selection of qualified charitable beneficiaries.  The National Philanthropic Trust suggests thinking of a DAF as a checking account to which a donor may contribute as often as he would like and only recommend a grant to one or many charities when he is ready.  Taxpayers should, of course, confirm that the DAF is indeed eligible to receive tax-deductible charitable contributions and that the minimum contribution amounts and annual fund fees are reasonable.

College Access Tax Credit (CATC):  A 50% credit against state taxes for amounts donated to fund Cal Grants for low-income college students.  While there is no federal credit, taxpayers may instead claim an itemized deduction on Schedule A.  Online contributions for 2016 may be made beginning March 2nd. The program is currently scheduled to expire at the end of 2017.

California Competes Tax Credit (CCTC):  A non-refundable credit available to businesses that want to locate to or stay and grow in CA.  Credit agreements must be negotiated between taxpayers and the Governor's Office of Business and Economic Development (GO-Biz).

Qualified Longevity Annuity Contract (QLAC):  Available to allow taxpayers to defer the RMD requirement past the age of 70½, although QLAC distributions must begin no later than age 85.  This fixed annuity may be funded with 25% of the taxpayer’s IRA up to $125,000 and guarantees a lifetime income stream which may be passed to spousal and other beneficiaries in the event that the plan owner dies before the contract payouts have been fully distributed.

Achieving a Better Life Experience Account (ABLE):  State-managed plans for disabled individuals (blind/disabled before age 26 and eligible for SSI or certified by the IRS with a permanent physical or mental disability).  Contributions (max $14K in 2015) are non-deductible but distributions are tax-free if used to pay for qualified expenses related to the disability.

My Retirement Account (myRA):  Savers with AGI under $131K ($193K if married) can establish no-fee accounts with as little as $25, contribute up to $5,500/year ($6,500 if over age 50), and earn a government-guaranteed rate (currently about 2%) for up to 30 years or until the account value reaches $15K, at which time the balance is automatically rolled over to a ROTH.  Think of it as a starter-IRA.

Shared Responsibility Payment:  All individuals and their family members are required to have medical insurance; which must be verified and reported on the taxpayer’s income tax return.  If you obtained coverage through the Health Insurance Marketplace, you will receive Form 1095-A documenting coverage maintained during each month of the prior year (2015).  If you purchased insurance directly from an insurance company, you will receive Form 1095-B; if you were insured through an employer plan, you will receive Form 1095-C.  These forms must be provided to you on or before March 31st.  Since verification of Minimum Essential Coverage is crucial, taxpayers who have all other requisite data, may have to postpone filing until Form 1095 is received.  TAX TIP:  You may submit all available data to me early in the tax season so we need only to await the elusive 1095 to complete the filing process in a timely manner.

In 2015, failure to obtain coverage may cost you a penalty equal to the greater of $325/adult ($162.50/child) or 2% of your yearly household income.  For 2016, these thresholds rise to $695/adult and 2.5% of household income.  You can use this calculator to estimate your penalty.  TAX TIP:  The annual open enrollment period for 2016 is now closed but certain qualifying “life events” (e.g., moving to a new state, certain changes in your income, and changes in your family size) may allow you to obtain coverage at any time during the year.

Repayment of Premium Tax Credit: Taxpayers may be required to refund advance credits received during 2015 to subsidize the cost of monthly premiums for insurance obtained through the Marketplace if actual income reported on the tax return exceeds the amount of income used to determine the premium credit when the insurance was purchased.  Even taxpayers who otherwise have no filing requirement must file a tax return to reconcile the advance credit.  TAX TIP:  Taxpayers who obtain insurance through the Marketplace are required to report life changes (e.g., marriage, divorce, pregnancy, disability and, of course, changes in income) to HealthCare.gov throughout the year to ensure that their coverage needs are met as well as their premiums adjusted to avoid repayment  of excess advance credits received.

Medicare Surtax:  Wage-earners and self-employed taxpayers with incomes in excess of $200K ($250K if married) are subject to an additional 0.9% FICA tax.  TAX TIP:  Payroll withholding allowances and/or quarterly estimates should be adjusted to cover the additional liability as taxpayers can otherwise be hit with underpayment penalties.

Net Investment Income (NII):  Investment income in excess of threshold amounts ($200K if single, $250K if married) is subject to a Medicare surtax of 3.8%.  Investment income includes dividends, interest, net capital gains, annuities, royalties and net rents, as well as the gain on sale of a principal residence in excess of the allowable §121 exclusion.  Income from tax-exempt interest, VA benefits, self-employed income, IRA and pension distributions are specifically excluded.  TAX TIP:  If possible, spread the receipt of investment income over two or more years or maximize offsetting above-the-line deductions.

Home Office Deduction:  Under the optional safe harbor method, taxpayers may claim a deduction equal to $5/ft² (maximum $1,500) in lieu of separately detailing allowable expenses and depreciation presuming, of course, that they have an area in the home that is used regularly and exclusively for business and that such use is for the convenience of the employer.

Repair Regulations:  Last year, the IRS introduced new reporting requirements for business and rental property repairs in an effort to standardize and simplify taxpayer reporting.  In general, all tangible property purchased for use in a trade or business – except inventory – must be capitalized, except costs for (a) materials and supplies under $200, (b) routine maintenance incurred to keep property in its ordinarily operating condition, (c) de minimis outlays (recently increased to $2,500) for which taxpayer makes an affirmative Safe Harbor election, and (d) maintenance and repair of buildings owned by small taxpayers with outlays of less than $10K.  TAX TIP:  Taxpayers may wish to split multiple projects over two calendar years to avoid the capitalization threshold.