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tax credits

Education Tax Benefits

Going to college can be a stressful time for students and parents. Some of the costs of your education can be offset by tax credits and reductions to income.  These credits and reductions can be complicated, so it takes a bit of coordination to keep things straight.  More than one education tax benefit may be taken in one year, but generally the expenses must be segregated from one another in your reporting.  In other words, you couldn’t take two tax benefits based upon the exact same education expenses, with some exceptions.  For example, you can use most qualified expenses for the tax credits and apply the expense toward eliminating the 10% penalty on IRA distributions at the same time. Generally though, most tax benefits for education can only be applied once to each expense.  Only one of the following credits may be used per student in any given year: American […]

Get Your Kids to Help You With Your Taxes

Sometimes as parents we get overwhelmed with the costs of raising kids.  What with the high cost of soccer camp, video games, and lessons on the clarinet, it can be woefully expensive raising kids. Sometimes though, there are surprising ways that kids can help out with costs – and your income taxes is one of those places where having kids does help.  The IRS recently published their Tax Tip 2014-11 which lists eight ways that having children can help to lower your taxes. The actual text of Tax Tip 2014-11 follows: Eight Tax Savers for Parents Your children may help you qualify for valuable tax benefits.  Here are eight tax benefits parents should look out for when filing their federal tax returns this year. Dependents. In most cases, you can claim your child as a dependent.  This applies even if your child was born any time in 2013.  for more […]

You’re Running Out of Time If You Want to Use These 13 Tax Provisions

Every year we say goodbye to certain things that we’ve come to know and love, and certain provisions of the tax law are not excluded from this treatment.  Portions of the tax law are intentionally added with short life-spans, and others are retired from time to time as their intended use has either changed or been eliminated. Listed below are the tax provisions (according to the Joint Committee on Taxation) that will be expiring at the end of the year – some we’ll be glad to see go, others we’ll wish would stay around a while.  Some will be extended by Congress, either at the last moment or on into the new year, as has happened in the past. Note: This article is aimed toward individual taxpayers rather than businesses, so I’ve only listed those provisions that will have impact on individuals.  There are quite a few provisions expiring that […]

Adoption Credit for Tax Year 2012 and beyond

As you probably already know if you’re in the position to seek the adoption credit, this credit has undergone some changes for the 2012 filing season. In the past, for tax years 2010 and 2011, the adoption credit was a refundable credit – meaning that you could receive the entire credit regardless of the amount of tax you have to pay.  For example, if you had $10,000 of adoption credit and your tax return otherwise indicates that your tax is $6,000, you were able to claim the entire credit and $4,000 would be refunded to you.  This was in addition to any overpayment you may have made on your withholding. However, for 2012 (and beyond, unless the rules change again) the adoption credit is back to being non-refundable.  Now, in the situation described above, the maximum amount of credit that you could claim is equal to your tax, or $6,000. […]

IRS Guidance for the Principal Reduction Alternative of HAMP

There is a program that the Department of Treasury and HUD have established to assist financially-distressed homeowners.  Under this program, called Home Affordable Modification Program-Principal Reduction Alternative (HAMP-PRA), the principal of the borrower’s mortgage may be reduced, allowing the homeowner to (hopefully) retain his home and not lose it to foreclosure. The IRS recently offered guidance on how the program works, in their Newswire IR-2013-8, dated January 24, 2013.  The actual text of the release is below: IRS Announces Guidance on the Principal Reduction Alternative Offered in the Home Affordable Modification Program (HAMP) WASHINGTON – The Internal Revenue Service today announced guidance to borrowers, mortgage loan holders and loan servicers who are participating in the Principal Reduction AlternativeSM offered through the Department of the Treasury’s and Department of Housing And Urban Development’s Home Affordable Modification Program® (HAMP-PRA®). To help financially distressed homeowners lower their monthly mortgage payments, Treasury and HUD […]

After The Storm: Tax Breaks to Minimize Devastation of Superstorm Sandy

When Superstorm Sandy made landfall in New Jersey, it is doubtful that many of the residents there, or in the other New England states, were thinking about taxes. It is in the aftermath of a major storm with the devastation clear that those in need start searching for tax breaks. Sandy left a death toll in the double digits and estimated damage to public, residential and commercial property in the billions. Included in the statistics are hundreds of homes lost, and thousands without power. The impact is in line with other historical storms such as Ivan and Katrina. As things start to settle and the worst hit areas begin the long, tedious rebuilding process, residents will be looking to government tax breaks for help. Immediate Relief on Tax Payments Immediately after the disaster, the IRS made the decision to defer the individual income tax payment deadline. Those owing payments initially […]

IRS Helps You Out When Your Boss Doesn’t Pay You Back For Expenses Related to Your Job

Employee Transfer (Photo credit: Wikipedia) When you have to pay for certain expenses in order to do your job, sometimes (if you’ve got a good employer!) your company will reimburse you for those expenses.  On the other hand, sometimes they don’t reimburse you for those expenses.  Did you know that you can deduct those expenses (to a certain extent) from your income when you file your tax return?  And in some cases, when your employer reimburses you, you still need to fill out additional tax forms in order to keep from being taxed on the reimbursements. The IRS recently published their Tax Tip 2012-54, which details how to go about deducting these expenses, and what expenses are qualified for deduction.  Below is the text of the Tax Tip in its entirety. Employee Business Expenses Some employees may be able to deduct certain work-related expenses.  The following facts from the IRS […]

Tax Credits That Can Increase Your Refund

The IRS recently issued their Tax Tip 2012-41, which lists out some of the tax credits that are refundable.  Most tax credits are not refundable, meaning that if the amount of the credit is more than your tax for the year, the credit is limited only to the amount of your tax. For example, if you had tax payable of $1,500 and then had Education Credits, Energy Credits, and/or Foreign Tax Credits amounting to more than $1,500.  Your credits will be limited to $1,500 since that’s your tax payable and the credits are not refundable. On the other hand, there are a few credits that are refundable, as listed below in the actual text from Tax Tip 2012-41. Four Tax Credits that Can Boost Your Refund A tax credit is a dollar-for-dollar reduction of taxes owed.  Some tax credits are refundable meaning if you are eligible and claim one, you […]

11 Facts About the Child Tax Credit (2011)

Image via Wikipedia The IRS recently issued their Tax Tip 2012-29, which provides some key points about the Child Tax Credit. Below is the text of the tip: The Child Tax Credit is available to eligible taxpayers with qualifying children under age 17.  The IRS would like you to know these eleven facts about the Child Tax Credit. Amount With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17. Qualification A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence. Age Test To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011. Relationship Test To claim a child for purposes of the Child Tax Credit, the child must […]

The Dirty Dozen Tax Scams for 2012

taxes (Photo credit: 401K) Every year around this time, the IRS issues its list of the top tax scams they’ve seen, as a reminder to taxpayers to use caution during tax season to protect themselves against schemes from identity theft to return preparer fraud. Following is the list of the Dirty Dozen Tax Scams for 2012, taken from IRS publication IR-2012-23: Identity Theft Topping this year’s Dirty Dozen list is identity theft.  In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy that is focused on preventing, detecting and resolving identity theft cases as soon as possible.  In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes. Identity theft cases are among the most complex ones the IRS […]

Do You Need to File a Tax Return This Year?

Image via Wikipedia Have you ever wondered if it was actually necessary to file a tax return?  Perhaps your income is relatively low, and so you wonder if it’s really required of you to file a return. Often it’s not entirely a case of a return being required, but rather it might be in your best interest to file a return in order to receive certain credits against your income.  Recently the IRS issued their TAX TIP 2012-02 which goes over some of the things you need to be aware of when considering if it’s necessary or in your best interest to file a return.  Portions of this TIP are listed below, with additional information added. Do I Need to File a Tax Return This Year? You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing […]

Expanded Adoption Tax Credit

Image via Wikipedia Recently the IRS published their Summertime Tax Tip 2011-10, which lists out six facts about the expanded adoption tax credit.  The credit is considered “expanded” due to the changes made by the Affordable Care Act of 2010, which increased the amount of the credit, while also making the credit refundable.  Refundable credits are such that, even if your tax on your tax return is less than the credit, whatever amount of your credit surpasses the tax can be refunded to you (much like the Earned Income Tax credit). Six Expanded Adoption Credit Facts Here are the six facts that the IRS lists: The adoption tax credit, which is as much as $13,170, offsets qualified adoption expenses making adoption possible for some families who could not otherwise afford it.  Taxpayers who adopt a child in 2010 or 2011 may qualify if you adopted or attempted to adopt a […]

A Restriction on the Home Buyer Credit

Here is a case where, even though the IRS documentation did not state it directly, the real rule of the law makes an explicit statement, and therefore the Code is where the final rules are taken from. In this particular case, there is a situation where the home buyer credit is not available: if the home is purchased from a parent or another close relative (and vice versa). And the taxpayer who relied only on an IRS publication found out the hard way that the Internal Revenue Code is the final word on the subject. There was a recent Tax Court case (Nievinski, TC Summary Opinion 2011-10) that challenged the limitation, and the Tax Court ruled in favor of the Service.  The argument was that, in a particular document, IRS Publication 4819 “Important Information About the First-Time Homebuyer Credit”, there was no express explanation of this limitation. Image via The […]

Tax Benefits For Parents

As parents, we spend a lot of money raising our children – from basic needs such as food, housing, doctor bills, and clothing, to education, daycare, soccer teams and lessons on the clarinet – it seems like the list is endless. Since the kids don’t generally pay you back (at least in dollars), the IRS steps in to help out.  There are several tax benefits that you may be eligible for just because the little urchins are in your care… and here’s a list of ten tax benefits that the IRS has put together (taken from IRS Tax Tip 2011-18): Dependents In most cases, a child can be claimed as a dependent in the year they were born.  For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Child Tax Credit You may be able to take this credit on your tax return for each of your […]

The Making Work Pay Credit

Many (or most) working taxpayers will be eligible to receive a special credit on their 2010 tax return, called the Making Work Pay Credit.  The IRS has recently produced their Tax Tip 2011-15 which explains five important provisions about the Making Work Pay Credit: The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns. Most workers received the benefit of the Making Work Pay Credit through larger paychecks, reflecting reduced federal income tax withholding during 2010. Taxpayers who file Form 1040 or 1040A will use Schedule M to figure the Making Work Pay Tax Credit.  Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit. Taxpayers who file Form 1040-EZ should use the worksheet for […]

Credit for Energy Saving Home Improvements for 2011

This tax credit has undergone a change from previous years.  In 2010, for example, you could achieve a credit for as much as 30% of the cost of your energy-saving home improvements, with a ceiling of $1,500. Beginning January 1, 2011, the credit rate is now just 10%, and the ceiling has been lowered to $500.  Something important to keep in mind about this credit:  any credit claimed in prior years (2009 and/or 2010) will be used to reduce your ceiling.  In other words, if you claimed the full credit (or any amount up to $500) on a previous year’s tax return, you have no energy-saving home improvement credit available to you. In addition to the changes above, there are specific item caps in place as well.  For example, if you are putting in a new furnace or water heater, the credit for those units is capped at $150.  If […]

Just Starting With Retirement Savings? Get All the Credit You’re Due!

It’s a known fact that setting up a systematic savings plan is critical to providing yourself with financial security in the future.  There are tax benefits to simply making contributions to an IRA or a 401(k) – you’ll be able to deduct (or simply not include) those funds in your taxable income come tax time.  In addition, the tax-deferred growth of these funds will provide you with a source of income for the future. But did you realize that there are other tax credits available for certain taxpayers making contributions to retirement plans?  It’s called the Saver’s Credit (formally known as the Retirement Savings Contributions Credit), and it’s available for folks who meet certain eligibility requirements who have made contributions to retirement savings plans during the tax year. Eligibility Depending upon your filing status, there is a limit to the amount of income that you can have earned in order […]

IRS Updates Info on First-Time Homebuyer Credit Expansion

The following information was released by the IRS on 11/25/2009 as Tax Tip 2009-13: If you are in the market for a new home, you may still be able to claim the First-Time Homebuyer Credit. Congress recently passed The Worker, Homeownership and Business Assistance Act Of 2009, extending the First-Time Homebuyer Credit and expanding who qualifies. Here are the top 10 things the IRS wants you to know about the expanded credit and the qualifications you must meet in order to qualify for it. You must buy – or enter into a binding contract to buy a principal residence – on or before April 30, 2010. If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010. Note: the closing date was updated to on or before September 30, 2010. For qualifying purchases in 2010, you will have […]