If you financially support your parents, the federal government wants to help. At tax time, there are a few different options for tax assistance that is available to those who provide parental support. The 2014 tax season brings a new dependency tax care credit, as well as the ability to claim a parent as a dependent. In doing so, you may have the option to write off any medical expenses that your parents incurred and you paid. There are certain requirements that you have to meet in order to claim your parent as a dependent, though, so check to make sure you understand the rules before filing your taxes.

Requirements For Dependent Claim

The IRS has a standard clause regarding the definition of a dependent. By the rule, you have to be responsible for over 50% of your parent’s yearly income if you want to classify your parent as a dependent. Mom or dad can reduce your taxable income by $3,950 if eligible to be a dependent. (more…)

Categories: Credits, Deductions, Dependents Tags: , , ,

Looking to make tax time a little brighter? Consider itemizing your taxes, which will allow you to claim interest you paid on your first and second mortgages. This deduction, worth up to $1.1 million in savings, includes mortgage loans (up to $1 million) and home-equity loans (up to $100,000). Even better, you don’t have to use the loans to improve the home’s condition.

These deductions can be substantial for homeowners with high mortgages. In neighborhoods with high home values, homeowners can use the tax benefit to their advantage if they have a mortgage greater than $625,000 ($417,000 in standard markets). What this means is that a couple in the 33% tax bracket, with an income less than $309,900, can reap a tax benefit of up to $9,900 on $30,000 of mortgage interest paid. (more…)

Categories: Deductions Tags: , ,

Are you wondering if you should take the standard deduction? If you’re single, you’re looking at $6,200. Married couples at twice that amount. Maybe you’re considering itemizing your deductions to get a bigger tax return. If you are, remember that you’ll need to have your receipts for all medical, tax, charitable contributions and other expenses. You’ll also need mortgage records and banking information, and you’ll need to adhere to percentage rules and exceptions.

Itemizing can be rough. It requires organization, excellent record keeping, and a whole lot of patience. And after all that, it may be unnecessary. You may make out better by using the standard deduction, as well as tax breaks that are allowed in conjunction with it. Lines 23 through 35 of the Form 1040, as well as the detailed instructions in the 1040 booklet, will explain how to take breaks in addition to the standard deductions. The following explain a little more about these types of deductions. (more…)

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As the real estate market begins to trend to the positive side, it’s a good time to review the tax requirements for selling a home, as well as any associated tax breaks. If you sell your primary residence (the one you lived in full time), there’s a chance the sale may be tax-free. However, any profit on the sale of a second or third home is taxed.

Tax Break for Primary Residence

Married couples who file together are able to receive tax-free up to $500,000 ($250,000 for single filers) of profits they make for selling their first home. Profits great than the threshold are taxed at long-term capital gains rates, which are 20% to 23.8% currently.

The tax break only applies to people selling their primary home, and doesn’t include home costs or improvements. It’s specifically applied to profits incurred from the sale. A married couple who purchased a $200,000 home and spent $50,000 on improvements would be able to sell for as much as $750,000 before they’d owe federal taxes, thanks to the $500,000 tax break. (more…)

Categories: Deductions, General Tags: ,

The time after graduation can be a tough one, financially. Starting out on your own, searching for a job, trying to pay back money you may have borrowed for school can all be quite stressful when it comes to managing a budget. Thankfully, there are a few tax breaks that recent college graduates can claim in order to save. (more…)

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Figuring out the Five Statuses

February 18, 2015

When the time comes to file your taxes, you’ll need to know which filing status you should use. There are differences between the five different options, and you’ll want to choose the one that gives you the greatest benefit. Make tax time easier and quicker by filing with the right status.

The Big Five

The five different statuses are: single, married filing jointly, married filing separately, head of household, or qualifying widow(er). If there is more than one status in which you meet the required criteria, you should file using the one that gives you the highest tax benefit. (more…)

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The Earned Income Tax Credit is one way that low and moderate income families can save some money at tax time. The EITC is refundable, and can reduce the taxes working families owe to zero in certain circumstances. If your income comes primarily from working, and not investing, you may qualify.

The income levels change every year, but an expansion has been granted until 2017 that extends the credit to working families with three or more dependents. The IRS has set guidelines that can help you figure out if you qualify for the credit, and if so, how much you will get. (more…)

Categories: Credits Tags: , , , , , ,

Working families know how expensive it can be to raise children. At tax time, the government offers some help for these families through the Child Tax Credit, which was enacted in 1997. This credit allows eligible families to receive up to $1,000 per child under the age of 17.

Both Democrats and Republicans have shown continued support for the tax credit, leading to an expansion in 2001. Now, qualifying families are eligible to subtract the credit right form the amount of taxes they owed for the year. For example, a couple with 3 children are able to deduct $3,000 ($1,000 per child) from the taxes they owe for the year. (more…)

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Common Business Deductions

February 15, 2015

As a business professional, you’re likely aware of the many deductions that you may be entitled to when filing your tax return. Almost anything you buy for the business can be deducted, as long as it is necessary to the business. Also, the cost has to be sensible. For small businesses, the deductions can really add up and help save some on your bottom line. Think of it this way: Your business falls in the 30% bracket and you buy a $1,000 computer. You can save $300 in a tax deduction as long as the computer is used for business purposes. You aren’t eligible to claim a deduction on a personal expense. (more…)

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Appropriate Record Retention

February 14, 2015

Your taxes are filed. Your refund’s been deposited. You’re gearing up for another year of deductions and expenses. So what should you do with this year’s tax documents? You may need to use your previous year’s tax documents for reference, or as proof if you get audited. It’s a no brainer that you should save your documents, but many taxpayers wonder exactly what the timeframe for retention is.

The IRS says it depends on the document, meaning what the expense is and what the document serves to prove. You should also keep copies of tax returns that you have previously filed, as they may aid you in the future. (more…)

Categories: General Tags: , , ,