Selling your Home

December 18, 2018

Since the real estate market is beginning to show a positive trend, it is a good time to review the tax requirements for selling a home and any related tax breaks. If you sell your primary home (the one you lived in full time), it is likely that the sale will be tax – free. Any profits from the sale of a second or third home are taxed, however.

Tax break for primary residence:

Couples who file together can receive tax – free profits of up to $ 500,000 ($ 250,000 for single filers) from their first home. Profits above the threshold are taxed at long – term capital gains rates, currently between 20% and 23.8%. The tax break applies only to people who sell their primary home and does not cover the cost of their home or improvements. This applies specifically to profits from the sale. A married couple who bought a $ 300,000 home and spent $ 100,000 on improvements could, thanks to the $ 500,000 tax break, sell up to $ 900,000 before they owed federal tax.

Eligibility

Homeowners can claim a tax break every two years as long as they live in the home they sell out of the last five years for at least two years. Homes that meet the requirements for eligibility can be a duplex, a condo, a boat or a mobile home, as long as they have standard plumbing, kitchen and beds. Those who have been widowed in the last two years can claim the $ 500,000 exclusion if they sell their house within two years of the passing of their spouse. Furthermore, if the homeowner is required to move due to changes in employment, health reasons or an unexpected circumstance such as death or divorce but has not complied with the two-year provision, he or she may be excluded. If you decide to use your holiday home as our primary place of residence, the rules become a bit more difficult. The IRS determines primarily the amount of time you have spent on the property and prorates the credit amount to which you are entitled. Rental units that are part of the primary property of the homeowner, such as a basement or garage, are not included in the tax credit and only the percentage maintained by the homeowner is eligible for the tax break.

Categories: General

Financially, the time after graduation can be tough. Starting by yourself, looking for a job, trying to pay back money you borrowed for school can all be quite stressful when it comes to budget management. Fortunately, some tax breaks can be claimed by recent college graduates to save money.

Student loan interest deduction: borrowers earning less than $ 65,000 per year can receive a full interest deduction on a student loan. Those in the interest range of $ 65,000 to $ 80,000 are entitled to a partial deduction. A borrower earning $ 55,000 per year with loans in excess of $ 2,500 can save $ 625 per tax.

Lifetime Learning Credit: taxpayers can receive an annual credit of $ 2,000 for all qualifying expenses in their own or post-secondary education of their dependents. The credit is not reimbursable, but it matches the dollar’s expenses. Expenditure of $ 2,000 or less is reduced by the lifetime learning credit to zero. Students who graduated in May may claim a portion of their tax return costs.

The American Opportunity Tax Credit is also available to students who receive $ 2,500 in credit in the first four years of post – secondary education.

Opportunities: Graduates are eligible for a variety of tax credits and breaks which young professionals often overlook. For example, the 401(k) pension schemes that allow pre – tax contributions can reduce your tax bill or a Roth IRA that taxes but does not withdraw contributions can help your tax bills. Saving is another option for a tax credit for many graduates. Those earning less than $ 18,000 per year are eligible for a tax credit of up to $ 2,000 for their savings.

It only takes a bit of research and you can find a variety of tax credits and deductions that can help you keep your money in your pocket more. Every little bit helps, particularly if you’re fresh out of school.

Categories: Credits Tags: , ,

Figuring out the Filing Status

December 16, 2018

When your taxes are filed, you need to know what filing status you should use. There are differences between the five different options, and you will choose the one that best benefits you. Make tax time easier and faster by filing correctly. The Big Five The five different status are: single, married, separate married, householder or qualifying widow. If you meet the required criteria in more than one status, you should file using the one that gives you the highest tax benefit.

Single: Usually, if you’re not married, you would file with a single status. It is important to be aware of special circumstances that can affect individuals who file individually. Taxpayers who are legally separated, even if only in December, are considered to be individuals by the IRS. Single, unmarried persons without dependents should apply for this status, but those with dependents should consider their eligibility as head of household. Single consideration also includes divorce and annulment.

Married: married couples may choose to file a single tax return together, or they may file separately using a separate married filing. Legally married couples are only required to be married for a small part of the tax year. Couples whose union is subject to common law can also file as married if their court is recognized by the state. Partners who live separately but are not legally divorced still have to file as married taxpayers most of the time. Married couples who file their revenues jointly on a single return. These types of returns require the signatures of both parties and the couple shares the responsibility for paying the taxes. There are only a few circumstances in which joint responsibility does not affect the couple, such as innocent spousal relief, liability separation (if they have not lived together for the tax year) and fair relief. The primary filer may need to sign the return as a proxy in some cases, but must include a written explanation. This can happen when one spouse is deployed by the army.

Widowed: you are eligible to file married if your spouse died during the tax year and you did not remarry. You can then file as a qualifying widow for the following two years, provided you remain unmarried. Once you remarry, you should file with your current spouse as married. If you remarry the same year your spouse passes, you must file with your deceased spouse separately and with your new spouse a separate return.

The selection of the correct status is an important part of your tax return. This is one of the easy ways to maximize your tax benefit and benefit from all the deductions and credits offered by your ideal status.

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The earned income tax credit is a way for low and moderate income families to save some money during taxation. The EITC is reimbursable and may reduce taxes owed to families working under certain circumstances to zero. If your income primarily comes from working and not investing, you are eligible. The level of income changes every year, but an expansion was granted until 2018, extending the loan to working families with three or more dependents. The IRS has set guidelines that can help you find out if you are eligible for the credit and how much you get.

2018 Eligibility requirements:

  • All income from investments must be less than $ 3,500 for the entire tax year in order to qualify for the EITC.
  • The earned income credit applies to working taxpayers that have earned income falling below certain thresholds. The qualification threshold depends on the number of persons in each family. The thresholds in 2018 to qualify for this credit include:
    • No Children:  earnings must be less than $15,270 or $20,950 if married filing jointly.
    • One Child:  earnings must be less than $40,320 or $46,010 if married filing jointly.
    • Two Children:  earnings must be less than $45,802 or $51,492 if married filing jointly.
    • Three or More Children:  earnings must be less than $49,194 or $54,884 if married filing jointly.
  • You can’t be married and file separately, or claim an exclusion for foreign earned income if you want to claim the Earned Income Tax Credit.

In addition, you can not be claimed as dependent on the return of anyone else and you must file a tax return to receive the credit. The eligibility age requirement for taxpayers without a qualifying child is 25 to 64 by the end of the year. Credit amounts The amount you receive depends on your total annual income and the number of qualifying children you claim.

You’re going to save more of your hard cash and less goes to Uncle Sam. Since money is deducted from your earnings before you see it, you can regard the EITC as a way of putting more money back into your check. From social security and Medicare taxes to withholding income taxes from your employer, you have money taken out before you even have the opportunity to spend. Use the EITC to put more money back in your wallet and make tax time for everyone a little less stressful.

Categories: Credits Tags: , ,

The Child Tax Credit

December 14, 2018

Families working know how expensive it is to raise children. At tax time, the government offers these families some help through the 1997 child tax credit. This credit gives eligible families $ 2,000 per child under 17 years of age. Both Democrats and Republicans continued to support tax credit, which resulted in an expansion in 2001. Eligible families are now eligible to withdraw the right credit for the amount of tax they owed for the year. For example, a couple with three children can deduct $ 6,000 ($ 2,000 per child) from their yearly taxes. The child tax credit is reimbursable if the credit amount eligible for a family exceeds the amount of taxes that a family knows. This credit, known as the additional child tax credit, encourages families to work even if they receive low income, because they can claim the tax credit even if they do not owe taxes.

The most important provisions of the Tax Cuts and Jobs Act for taxpayers with children or other dependents may be changes in child tax credits. As in the previous legislation, taxpayers may claim a child tax credit for each child under the age of 17. However, the new law doubles the loan from 1,000 dollars per child to 2,000 dollars per child. Under the new law, the credit reduction does not begin until income exceeds 400,000 dollars on a joint return or 200,000 dollars on any other return. In 2018, low – income taxpayers will be reimbursed up to $ 1,400 of credit per child. Starting in 2018, taxpayers claiming child credit must show the social security number of the child (SSN) on the return. In the past, a taxpayer could give another tax number to a child without a SSN. New credit for other employees. The new law creates a new non – refundable $ 500 tax credit for dependents who are not eligible for the regular child tax credit, including children under 17 years of age who do not have an SSN.

Important poverty reduction The child tax credit has shown that it has a significant impact on poverty reduction across the United States. Last year alone, credit saved 3 million people from poverty, which includes 1.6 million children. The loan can be combined with the earned income tax credit to help raise the amount of money a family receives and help them to exceed the poverty line. Typically, child tax assistance is not available to many low – income families, and some, such as child and dependent care tax credit, are not reimbursable. The more income a family has, the less financial assistance they need.

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Business Deductions

December 13, 2018

As a businessman, you are probably aware of the many deductions you may have when you file your tax return. You can deduct almost anything you buy for the company as long as it is necessary for the company. The cost must also be sensible. The deductions can really add up for small businesses and help save some on your bottom line. Think of it like this: your company falls within the 25% range and you buy a $ 2,000 computer. You can save $ 500 in a tax deduction insofar as your computer is used for business. You are not eligible to claim a personal expense deduction. Some of the most common deductions are: office costs: the maintenance of a company office can lead to significant deductions. You can deduct rents and utilities and you can deduct a portion of your monthly rent if you do not own your home if you work from home. Make sure your home office meets all the requirements in order to deduct them.

Travel expenses: business travel may be deducted as long as the journey is carried out. You can deduct airfare, accommodation and other costs. Meals you eat during business are deductible at 50 percent. If you organize your trip properly, you can even deduct half-business and half-personal costs for a trip. Transport: car and truck deductions are the most common deduction for companies. You can deduct all your business driving, except the drive to and from your home to your workplace. You can specify your costs or opt for a standard deduction of 0.545/mile. The standard deduction only requires you to track your kilometers instead of the costs of gas and repair. Meals / entertainment: In the past, companies could spend many outings. However, the IRS recently stopped these deductions unless you have a genuinely legitimate business reason to attend the event. You also need to have a thorough business discussion before, during or immediately after the event. Depreciation: Some property, such as cars, furniture and computers, is subject to depreciation and you can claim the cost gradually.

Thanks to the IRS code section 179, you are not always required to depreciate. This enables small companies to deduct the entire cost of the property and create a greater deduction at once. Supplies: If you purchase items you need to keep your company active, you can deduct them. There are also simple supply costs, such as rubber bands and paper clips, so keep these receipts. Legal costs: Probably at some point in the tax year you used professional legal services. If you had paid for these services, you can deduct the costs as long as they deal directly with the business. Insurance: property and liability insurance can be deducted if the policy applies to the business. You may be entitled to deduct part of your homeowner’s insurance if you work from a home office. Self – employed persons may also deduct health insurance expenses.

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Filing Status

December 10, 2018

The status of your tax filing is one of the most important decisions you make at the time of taxation. In addition to the tax rates and the different amounts you can deduct, your filing status determines the benefits for which you are eligible. Your registration status depends on your marital status as of 31 December of the tax year and whether or not you have dependents to claim. Taxpayers married on the last day of the tax year have two options for filing: separately or jointly. If a person lives separately from his or her spouse and can claim a dependent, he or she can be eligible to file as the head of the house. Couples who have chosen to file together can use the married status and file a single return combined with income and deductions. Joint filing can save the couple cash when preparing their tax return. For couples who go through a divorce or for those who need to keep their records and finances separate, filing separately is an option.

Taxpayers who are not married on 31 December of the tax year are likely to file as singles. Those individual taxpayers who have a dependent should be aware that if they file with the head of household status, they may receive additional benefits. Head of the household status usually gives a higher standard deduction and a lower tax rate than the single status, so you should consider maximizing your benefits when applicable. Widow(er) Taxpayers whose spouse died in the current tax year should use the married status and can file separately or jointly. If the spouse died in the two years prior to the current tax year, the status of a qualifying widow should be applied. This filing status allows you to file together under the same conditions as you were allowed to do during your marriage.

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Education Credits 

December 9, 2018

Education is not cheap and it is difficult for far too many people to pay for their education. The federal government has fortunately developed two different tax credits that can help reduce the amount owed at the time of taxation. These credits, the American Opportunity Credit and the Lifetime Learning Credit help taxpayers who have incurred expenses related to education, such as tuition, fees, supplies, books and other equipment. Any personal expenditure, such as charges, transport costs and insurance, is not eligible for tax credit purposes. For those who pay their tuition with scholarship funds, grants or fellowships, no tax credit is offered. In addition, the credits depend on your income and the amount you can earn annually is restricted. The person claiming the credit can not be claimed as a reliant on the return of someone else.

The American Opportunity Credit enables taxpayers to receive a tax benefit of up to $ 2,500 per qualifying student. The requirements state that the student must be enrolled in the school for at least half a year during the entire academic semester. This credit applies only to those who have a degree in graduation but can also cover certain certifications. Anyone convicted of a crime against drugs can not receive the credit. The AOC is reimbursable by 40%, which means that even those who do not owe taxes can reimburse up to $ 1,000 by claiming the credit. The credit for lifelong learning is not reimbursable, although taxpayers convicted of felony drugs can claim the credit. The LLC also does not set degree or status limitations, so that part – time graduate students can qualify for the benefit. Students eligible to claim the credit can receive up to $ 2,000 annually if the taxpayer claiming the credit has paid their annual taxes. These tax credits do not make education cheaper, but they can make it easier at the time of taxation.

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Donations

December 8, 2018

When you donate to an established charity, your donations are often deductible from taxes. This gives you the opportunity to get back some extra items that you won’t use anyway. You must ensure that you keep an accurate list of all the donation items, because you must report your donation to the IRS. At the moment, all items donated to the charity must be in good or better condition. Under the old tax laws, you could get a tax benefit for donated goods simply because they had a certain value. Today, however, the standard is that all items are in a decent state and can be used again. You will have to determine the value of the goods you donate and there are various ways to do that. You can simply record the value using a pen and a paper or use computer software specifically designed to track the value of your items. You should have a list of all donated items and each item’s value.

You don’t have to convert the list to the IRS, but you should store it with the remaining tax documents. Remember also to receive a donation from the charity as proof of your donation. The donation amount will not be listed on the receipt, but will be adequately documented if you are audited. Goods between $250 and $500 must be donated by the charity in writing. This typically happens in the case of donations to vehicles or boats. In addition, if your donation is more than $500, you must submit your regular tax return with Form 8283.

Categories: Deductions Tags: ,

Tax Dependents

December 7, 2018

One of the easiest ways to increase your tax benefits at the time of taxation is to claim a dependent for a child or adult. You can save some of the tax you owe, because certain dependents or a certain age and relationship can reduce your tax liability. You can claim the child tax credit, the earned income credit and the child care credit by claiming dependents. If you are unmarried but can claim a child as a dependent, you may be eligible to file your return using the head of household status.

The IRS has a separate set of criteria for who can be a dependent. In order for a taxpayer to claim as a dependent a child or an adult relative, the following requirements must be met: the filing taxpayer can not be claimed as a dependent on the return of anyone else. If the dependent is married, they can not file a joint return with their spouse unless, when they file separately, they owe no taxes and only file for the purpose of a refund. The dependent meets a residence / citizenship test, which means that he or she is a US citizen or a resident alien. There are situations in which the dependent may be a Canadian or Mexican resident. Each dependent has the right to be claimed only once, so that he can not be claimed at the return of another person. Dependent children must have been living with the taxpayer for more than six months in the tax year. The person who claims the dependent must have paid more than 50% of the support. It is important to examine all the IRS requirements for children and relatives who can be claimed as dependent. If you claim the same dependent as another taxpayer, you increase your chance of being audited. Each government loan has specific rules as to who can be claimed as dependent.

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