Wisconsin offers new health care, day care income tax deductions

Wisconsin residents who use health savings accounts or who have children in day care will be able to take advantage of new tax breaks as they fill out their 2011 income tax returns this year. Companies that create jobs in Wisconsin also are in line for new benefits.
"One of the most important things to a lot of people is health savings accounts," said Wisconsin Department of Revenue secretary Richard Chandler.
The special accounts, set aside to cover medical expenses, have qualified for federal tax deductions but 2011 is the first year the state of Wisconsin is following suit.
People who have health insurance with high deductibles or who don't have health insurance are often those who use health savings accounts, said Mark Boebel, a partner in SVA Certified Public Accountants' tax services group, Madison.
"They are a way to put away money for medical expenses that aren't covered by insurance," he said. Boebel said the new benefit could provide up to $6,000 in additional tax deductions.
A bigger chunk of the cost of health care premiums will qualify for a state tax deduction.
In 2010, unemployed workers or workers whose employers did not pay any insurance costs could deduct 66.7 percent of their own expenses. For 2011, that deduction is 100 percent.
"You have quite a few people that are unemployed. If they're paying $10,000 (a year) for health care premiums to cover their family, an additional $3,300 of deductions would result in tax savings of anywhere from $150 to $200 over 2010," Boebel said.
Workers whose employers pay part of the cost of health insurance premiums will be able to deduct 25 percent of their 2011 expense, up from 10 percent the previous year.
For the first time, Wisconsin residents who pay for day care for their children will get a state tax break to go along with the longtime federal tax break.
"Starting in 2011, they're allowing up to a $750 deduction for one child and a $1,500 deduction if you have two or more children," Boebel said. He said those who qualify for the $1,500 could save about $125 in taxes.
The state child care deduction is on top of the state child tax credit, and the deduction will increase in the next few years, to as much as $3,000 for one child or $6,000 for more than one dependent in 2014.
Businesses that create jobs in Wisconsin may qualify for new tax credits:
• A business that moved to Wisconsin in 2011 pays no corporate income taxes for two years.
• Companies that create more jobs can receive a tax deduction of up to $4,000 per position.
• Certain types of companies that boost research spending can get a bigger tax credit for those costs, as much as five to six times more, said Kimberly Anderson, tax partner with CliftonLarsonAllen, Middleton.
A company that qualified for a $5,000 research and development tax credit in 2010 could get as much as a $30,000 tax credit, if its R&D costs increased enough, Anderson said.
"There are still a lot of companies out there that are not taking advantage of this," she said.
Investors or business owners who have long-term capital gains may be able to delay paying taxes on those gains if they pump their entire investment, including the gains, into another qualified Wisconsin business within six months.
That benefit "has to be planned," Boebel said. The money must have been put into a separate account following the sale, so it may be more of a planning tool for 2012 taxes, he said.