If you have a mortgage loan on your home you should expect to receive a Form 1098 Mortgage Interest Statement at tax time from your lender. Form 1098 will report the full amount of interested you paid on your load throughout the year. The lender will also send a copy of Form 1098 to the IRS as well, you are not required to file this form with your taxes. You will need to make sure any amount that you claim for mortgage interest deductions on your 1040 Schedule A matches what is noted on your Form 1098. The amount of mortgage interest you can deduct may be limited. It is advised that you retain a copy of Form 1098 for three years after you file your tax return.

Limitations to Mortgage Interest Deductions

You are limited on how much mortgage interest you can deduct each year on your taxes. Limitations are based on how you use your mortgage loan – whether if it is used to construct or build a residence. If you use a loan to obtain a home it is considered a Home Acquisition Debt, if you end up using it for other purposes it is considered Home Equity Debt. It doesn’t matter the type of loan you use or if it is backed by your first or second home, they are all subject to limitations.

Home Acquisition Debt

To be able to deduct home acquisition debt the total amount of your loan must not be greater than $1,000,000 and be either your primary or secondary residence. If you used your loan to purchase, build or improve a home you have created home acquisition debt. If you file your taxes using the status of Married Filing Separately you are subject to a reduced limit of $500,000.

Home Equity Debt

Home equity debit is considered a loan that is not used to build, purchase or upgrade a home. Your loan may also qualify if it exceeds the home acquisition debt limit but was used to improve a home significantly. You can only deduction up to $100,000 on these types of loans. If you are filing as Married Filing Separately the limit is $50,000.

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If you have earned interest during the tax year you are required to report it to the IRS. Even if the interest earned is not taxable you must file a 1099-INT with your taxes. You are not required to send copies of the 1099-INT’s that you receive as long as you report the income.

What Do the Boxes Mean?

So that you can report your interest correctly on your taxes you must understand which each box on a 1099-INT means.

  • Box 1: This box represents the total amount of taxable interest that you have received throughout the year. Examples of this are interest earned on a savings account.
  • Box 2: This box will report any penalties that you were assessed for early withdrawal of money.
  • Box 3: This box will report any interest you have received from items such as Treasury notes, bonds, bills or US savings bonds. Some of the interest gained form these sources may be tax exempt.
  • Box 4: This will report any federal taxes that have already been withheld from interest income.
  • Box 8: This box will show any interest earned through items from a state, such as municipal bonds.

Reporting Interest

You are required to report the total amount that is listed on a 1099-INT in box 1 in the line marked taxable interest on your federal tax return. The amount you report is taxed as other forms of income reported. If you had any penalties assessed to you in Box 2 of your 1099-INT, you may be eligible to claim a deduction in the Adjusted Gross Income section. Amounts in Box 8 are used for reference purposes only as the income reported here is tax exempt, but it is still required to be reported on your federal tax return.

If your taxable interest is greater than $1,500 total you must complete Schedule B of form 1040 and state the amount of interest

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As a business owner knowing what you are doing at tax time can have a large outcome on your end of year finances. There are tax regulations that can help lower the amount of taxes your business is required to pay, these deductions can be applied to certain business expenses. The amount of money deducted from your gross income will result in your taxable business income being lower.

By maximizing your deductions you can help lower the amount of business profits that are taxed. Some of the things that can be deducted include items such as, business trips and vacations, a new car and retirement savings plans. You will have to know how to file your deductions with the IRS to avoid any issues with your taxes.

Necessary and Ordinary Expenses

According to the tax code; Section 162, all expenses you seek to deduct for business must be considered ordinary and necessary. Although this tax code does not give any definition for either term of ordinary or necessary, so you have to think logically what can actually be deducted as a business expense. Generally this deduction would cover expenses such as office supplies or equipment used only in that business.

Large Expenses

Section 162 of the tax code does not place any limits on the amount that you can deduct for business expenses, although they do imply that any large expenditures must be reasonable. For example; a small business owner can’t fly half way across the world to find a paper manufacturer, but a large company would be able to deduct the cost of travel to visit a supplier.

Personal Expenses

The IRS does check to see if business owners try to deduct personal expenses as a business expense. Travel to and from work is considered a personal expense so you cannot claim that as a business expense. Likewise you cannot personal use of a company credit card or car as a business expense, the IRS closes watches these types of deduction claims.

There are many legal ways to claim the maximum deduction for business expenses and can help you spend money more wisely along the way.

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A lender is required to provide you with a 1098-E if you have paid more than $600 during the year in student loan interest. You are not required to do itemized deductions to take advantage of the student loan interest deductions. When you file your taxes student load interest will be subtracted from your total adjusted gross income (AGI) for the year.

Any interest you paid on personal loans, other than an exception of specific mortgage loans, is generally not deductible on your tax return. Though some taxpayers who have a modified adjusted gross income (MAGI) under $80,000 may qualify for student loan interest deduction used for higher education. If you are married and filing jointing you have a higher MAGI threshold of $160,000. Often MAGI is determined before deduction student loan interest from your reported gross income on your tax return. In 2014 student loan interest may decrease the amount of taxable income.

If you paid student load interest in excess of $2,500 you can only deduct up that amount.

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If you are a student the summer is a great time to earn a little extra cash and get a job. You have more free time being off from school and having a summer job can teach you about responsibility and give you some real world working experience. Having a summer job also means you will have to pay taxes like every other working person. The taxes you pay help your local community as well as your state and federal government. If you are a student working during the summer you should know the basics about taxes.

Taxes from working your summer job will be withheld from your paycheck by your employer. Your employer withholding taxes from your pay check is the easiest way to go. Some workers who are self-employed pay an estimated tax amount to the IRS on designated pay dates. The US tax system is set up as a pay as you go system, meaning you pay taxes as you earn money. (more…)

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If you are disabled there is a variety of tax credits available. By using these credits and deductions you can lower the amount of taxes you may owe, sometimes this can even lead to a refund. The IRS defines as being disabled by the following two conditions:

You are physically or mentally disabled that limits your ability to work, such as deafness and blindness.

You are impaired physically or mentally and it affects your ability to do common tasks that would affect your ability to work, such as walking, speaking, or breathing impairments.

There are a few different tax credits available for those who are disabled. These include; A credit for elderly/disabled, a credit for medical expenses and a larger standard deduction. (more…)

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As you know if you have a rental property you are required to report any earnings from tenants in your properties as income. Although if you have a property that you live in most of the year, but rent for short periods you may not have to report any income earned. You may even be able to deduct the costs that you have from renting the property, but you may also be limited on you deductions if the property is also your home. If you rent out a vacation home you need to know what it will affect at tax time.

Vacation Homes – Almost any type of property can be a vacation home such as; houses, apartments, condos, mobile homes and even boats.

Schedule E – You report any earned rental income by filing a Schedule E, Supplemental Income and Loss. You may also have the Net Investment Tax applied. (more…)

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If you are filing taxes in 2014 you should know how the Affordable Care Act will affect your taxes. You may notice your taxes impacted more this year depending on where you received health coverage from or if you had no health insurance at all.

Most tax payers with health coverage receive that coverage from their employers, Medicare, Medicaid or other government provided plan or through private coverage. If you have coverage from one of these sources you will only need to check the box for Full Year Coverage on line 61 of Form 1040.

If you happen to have received coverage through the Health Insurance Marketplace via your state or federal exchange you have a bit more work to do when filing. You should receive Form 1095-A (Health Insurance Marketplace Statement) via postal mail no later than January 31st 2015. With this form you will have all the information needed to complete the premium tax credit reconciliation. You are required to do this if you were giving advanced premium tax credits to offset the costs associated with your monthly health insurance premium. (more…)

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As a taxpayer you are able to claim exemptions for dependents, these dependents will fall under one of two categories; qualifying child or qualifying relative. By claiming dependents on your taxes you will lower your taxable income by an amount for each dependent that is equal to the exemption. For 2014 the dependency exemption was $3,950 so you would deduct that amount from your earned income for each eligible dependent. You are only able to claim dependents on one tax return, if someone else has already claimed a person as a dependent you cannot claim them as well.

Qualifying Children:

In order for a child to be claimed as a dependent they need to meet the requirements set forth by the IRS to determine dependency. In order for a child to qualify they need to meet five dependency tests: they must be a member of the household or relationship, they must be a citizen or resident, joint return, and they must fall under the age guidelines or a be a student and they must have been supported. (more…)

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There are some benefits to filing Head of Household if you qualify for the filing status. Usually by filing Head of Household filing status you have the advantage of having a lower tax rate and higher standard deduction they filers who use either the single or married filing separately status’.

You have five different filing status you can choose from when preparing you taxes. There are a few factors that can help you determine what the best filing status is for you. The tax bracket you fall in the amount of the standard deduction and specific credit you may qualify for all depends on the filing status you choose come tax time.

The five different tax status are as follows: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er). If you decide to file as Head of Household you must meet the following requirements. On the last day of the tax year you must be considered unmarried and have paid for more than the expenses of maintaining a home for yourself and another person for more than six month throughout the year.

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