Jul 122011
 
WASHINGTON - OCTOBER 13:  U.S. President Barac...

Image by Getty Images via @daylife

When tax time comes, parents have reason to be happy: there are a number of tax credits and other benefits offered only to parents. Tax professionals are often in the best position to identify those credits and other benefits. In fact, some studies show that parents who consult tax advisers save more than $3,500 on their annual tax bill.

Here are ten of the best tax benefits for parents.

1. Exemptions for Dependents. For every child who qualifies as dependent, parents reduce their taxable income by $3,650 in 2010. With three dependent children, taxable income is reduced by more than $10,000.

2. Child Tax Credit. Dependent children under the age of 17 qualify parents for the Child Tax Credit, which can be as much as $1,000 per child. There are limits on income to receive the full amount, so consult a tax adviser.

3. Child and Dependent Care Credit. Parents with children under age 13 who paid for childcare so they could work are often eligible for this tax credit.

4. Earned Income Tax Credit. Parents who have earned income during the year often qualify for this credit. Rules apply, so consult a tax adviser.

5. Adoption Credit. For parents who adopt a child, this credit can be worth as much as $12,150 depending on the circumstances.

6. Children who Earn Income. It is best to consult a tax adviser regarding whether children earning income need to file tax returns.

7. Investment Income. Depending on the circumstances, a child’s investment income may or may not be taxable at the parent’s tax rate. Parents should consult a tax adviser.

8. Higher Education Tax Credits. Recent tax laws have introduced new and modified existing credits for higher education. For parents whose children no longer qualify for the Child Tax Credit, these Higher Education Tax Credits can be a real boon.

9. Student Loan Interest Deduction. Parents can now deduct any interest they pay on their children’s student loans.

10. Health Insurance Deduction. For self-employed parents, health insurance premiums paid for children up to age 27 can now be deducted.

Barry W. is a fan of science fiction, and when he is not crafting the perfect light sabers with his sons he looks for tips to give to parents to help them deal with the economic situation in the US.

Jul 042011
 
NEW YORK - APRIL 15:  Pedestrians walk by a St...

Image by Getty Images via @daylife

Do you want a larger refund on your taxes this year? Follow these tips and increase your refund, avoid penalties from the IRS, and get your money back quicker.

1) You should keep track of your business related mileage. If you have two jobs you can declare the distance from the first job to the second. If you have one job, you can not claim mileage but you can use the mileage to seminars and workshops. You can claim the expenses of taxis, hotels, tips, planes, trains and car rentals on business trips.

2) Do you keep track of all your medical expenses? You have to spend 7.2% of your income for medical costs to count. Keeping records of your medical bills should be a priority. Have a special folder for this area. Try to make uncovered personal medical costs into a business expense.

3) You can claim necessary business meals and entertainment up to 50%, but you can’t claim entertainment for personal reasons, and the IRS will give both you and your employer difficulty if you attempt to.

4) Keep organized records of your expenses. Then, you will be prepared at tax time and will have documentation if the IRS questions something on your return. Your previous income tax returns should be kept in your records.

5) Do you need money back faster? File your income tax electronically. It comes back faster and is checked for errors. Another bonus is you will receive a confirmation of your return.

6) Do not obtain a loan to receive your refund faster. If you are paying someone to do your return, or you are preparing it yourself, it makes sense financially to wait for your money. High interest rates are charged for loans.

7) Make sure your taxes are submitted before the IRS deadline. You can ask for an extension if your prior tax returns were filed properly. Be aware of all IRS deadlines to avoid penalties!

It is an excellent idea to make use of tax breaks and keep good records of your expenses.

Josh T. is an avid reader and in his spare time he helps people with tax questions. When he is not helping others, he works for a tax resolution firm.

 Posted by at 3:54 pm
Apr 202011
 
Landlord?

Image by the justified sinner via Flickr

For all landlords who are contemplating renting their property to prospective tenants, there can be specific tax incentives involved. Many potential landlords think that the only benefit to renting is the rent itself, but that’s a misnomer. Substantial tax write-offs can be an even better reason for investing in rental property. Items that can legitimately be claimed on a landlord’s tax return are:

[1.] Property improvements

Although normally a landlord cannot deduct property improvements all in a single year, it is possible to take depreciation and recover those improvement costs over a period of 27.5 of those property rental years. In addition, though, some of those home improvement costs could be technically earmarked as simply rental property repairs, and they may be written off during the year that the improvements or repairs are performed.

[2.] Credit Card interest

If a credit card is utilized to pay for repairs or services provided for any tenant, the interest charged is a deductible item.

[3.] Landlord’s home office

A landlord can deduct any expenses related to a home office, based upon a percentage of the home used as a home office.

[4.] Expenses for local business travel

Local business travel includes driving to a rental property for repairs, improvements or simply responding to a tenant complaint, as well as travel to and from stores for the purpose of purchasing supplies. The auto or truck used for these activities can be written off via one of the following means –

A. Real costs such as automobile repairs and fuel.
B. The flat allowable cost per each deductible mile of 58.5¢. This rate should not be used, however, if business expenditure depreciation was previously claimed for that tax year.

[5.] Theft or Casualty Loss

If rental property has been destroyed or damaged, the total loss minus any insurance coverage may be claimed as a deduction.

[6.] Travelling long distances

With appropriate record-keeping, this includes hotel, meals, airfare for business related to being a landlord.

[7.] Do not rent to friends or family

A landlord could lose all possible tax deductions by renting to friends or family members.

Mr. Washa had only $15 to his name when he came to America in the late 1960’s, he is now an accomplished building superintendent in the city of Los Angeles.

 Posted by at 8:38 am