deductions http://www.wisebread.com/taxonomy/term/3547/all en-US 4 Ways Student Loans Impact Your Taxes http://www.wisebread.com/4-ways-student-loans-impact-your-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-ways-student-loans-impact-your-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_grad_broke_53019460.jpg" alt="Woman learning how student loans affect taxes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Tax time can make many feel anxious, especially if they're already burdened by student loan debt. Many people might not even think about their student loans when it comes time to file, and that would be a huge mistake.</p> <p>Here are three big tax issues &mdash; and one <em>huge</em> tax benefit &mdash; you should be aware of if you have student loan debt.</p> <h2>You Can Deduct Loan Interest</h2> <p>Yes, you can deduct your <a href="https://www.irs.gov/publications/p970/ch04.html">student loan interest</a>, reducing your income by up to $2,500. But to qualify for this deduction, you must earn less than $80,000 if single or $160,000 if you are filing jointly.</p> <p>If you paid more than $600 in interest on your student loan, you should automatically receive a Form 1098-E in the mail. However, if you do not receive this, you can still claim the interest you paid. Just request this form from your lender in January. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso">15 Ways to Pay Back Student Loans Faster</a>)</p> <h2>Defaulting on Your Loan Could Cost You Your Tax Refund</h2> <p>If you default on your federal student loan, your tax refund could go straight to your lender. They are legally allowed to take 100% of your tax refund. For most federal loans, you will be considered in default if you have not made a payment in 270 days.</p> <h2>Filing Jointly Can Cost You More in Student Loans</h2> <p>Many couples will file jointly to save money on their taxes and have easier access to tax credits, like the child tax credit and the dependent care credit. However, filing jointly can also make you pay more in student loan repayment throughout the year.</p> <p>Many individuals pay for their student loans on an income-driven repayment plan, which calculates monthly payments based off earnings. Since your joint income will be significantly higher than your individual incomes, your loan payments are likely to be higher. To make smaller monthly payments on your loans, you should probably file separately.</p> <p>You want to understand how much money it will cost to file your taxes separately versus how much you'll make in additional monthly student loan payments if you file jointly. MagnifyMoney.com put together a simple example scenario of a married couple without children. In their example, the couple would have saved over $1,100 in federal taxes if they filed jointly, but they would have saved $6,816 on their student loan payments by filing separately.</p> <h2>Student Loan Forgiveness/Cancellation Could Mean More Taxes</h2> <p>Student loan forgiveness programs are a great way to offset some of your student loan debt. However, some student loan forgiveness programs also come with a hefty tax bill in the end.</p> <p>Student loan forgiveness programs such as the Public Service Loan Forgiveness (PSLF) and other plans for teachers, health professionals, lawyers, or volunteers are all tax-free. If you follow the programs' rules for loan forgiveness, your loan will be forgiven without tax repercussions.</p> <p>Certain student loan forgiveness programs offered through individual states can be subjected to taxes. Many are not, but it is a good idea to do your research.</p> <p>If your student loan is cancelled or discharged, it can be considered taxable income. It might be cancelled or discharged for one of the following reasons:</p> <ul> <li>Cancellation for closed school;<br /> &nbsp;</li> <li>Cancellation for False Certification of the loan;<br /> &nbsp;</li> <li>Cancellation for unpaid refund of the loan;<br /> &nbsp;</li> <li>Discharge for death or disability.</li> </ul> <p>Finally, if you sign up for repayment programs that offer loan forgiveness after a certain number of years, any unpaid amount which is forgiven is considered taxable income. This usually happens with the income-based repayment (IBR) plans and the Pay As You Earn (PAYE) repayment plan. (See also:<a href="http://www.wisebread.com/5-sobering-facts-about-student-loan-debt?ref=seealso"> 5 Sobering Facts About Student Loan Debt</a>)</p> <p>Talk with a financial adviser that specializes in student loan debt for more help.</p> <p><em>Do you write off your student loan interest on taxes? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">8 Tax Tricks to Try if You&#039;re Stuck With Student Loans</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-ignore-these-4-things-before-refinancing-your-student-loans">Don&#039;t Ignore These 4 Things Before Refinancing Your Student Loans</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-student-loan-forbearance-anyway">What Is Student Loan Forbearance, Anyway?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">Don&#039;t Skip These 8 Tax Breaks for Students</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Taxes deductions filing jointly filing single interest loan forgiveness refunds repayment student loans Thu, 09 Jun 2016 09:30:21 +0000 Ashley Eneriz 1725704 at http://www.wisebread.com 5 Most Common Tax Mistakes Made by College Grads http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-most-common-tax-mistakes-made-by-college-grads" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000059339990.jpg" alt="College grads making common tax mistakes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Attention grads: While you may be done with college, you aren't off the hook from major assignments. One of those major assignments is filing your tax return, and this is one assignment deadline that you don't want to miss.</p> <p>This year, Monday April 18th is the deadline to file your federal taxes. (Residents of Maine and Massachusetts get an extra day!) With time running out, it&rsquo;s important to file your return correctly the first time around. Be on the lookout for the five most common tax mistakes made by college grads.</p> <h2>1. Not Claiming Education Credits</h2> <p>According to a 2014 study from H&amp;R Block, only two-thirds of Americans eligible for <a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">tax breaks for students</a> actually claim them! Within those tax breaks, the American Opportunity Credit and the Lifetime Learning Credit stand out because they can reduce your tax bill by up to $2,500 and $2,000, respectively.</p> <p>Unlike other tax deductions, the American Opportunity Credit can still get you a refund even when you don't owe any federal income tax. If the American Opportunity Tax Credit brings the amount you owe to zero, you can have 40% of the remaining amount of the credit (<a href="http://www.irs.gov/Individuals/AOTC">up to $1,000</a>) refunded to you.</p> <p>While the American Opportunity Tax Credit requires you to not have finished the first four years of higher education at the beginning of the tax year, the Lifetime Learning Credit doesn't require students to be working toward a degree. You're eligible to claim this credit as long as you're taking at least one class.</p> <p>Bonus: If you're taking a sabbatical from your recent graduation and are eligible to be claimed as a dependent by your parents, they can claim these credits in their own return.</p> <p>File <a href="http://www.irs.gov/pub/irs-pdf/f8863.pdf">Form 8863</a> with your federal return to claim the American Opportunity and Lifetime Learning Credits.</p> <h2>2. Not Filing Taxes When Abroad</h2> <p>Talking about sabbaticals, you still need to check with Uncle Sam every year during tax season even when you're abroad. Your worldwide income is subject to U.S. income tax, no matter where you live.</p> <p>The good news is that when you expect to get a refund or not to owe any federal taxes, you can take advantage of the <a href="https://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad---Automatic-2-Month-Extension-of-Time-to-File">automatic two-month extension</a> to file your return. However, if you believe that you will owe federal taxes, then file by the regular deadline (April 15 most years) to avoid paying applicable interest charges or penalties.</p> <h2>3. Forgetting About Moving Expenses</h2> <p>Chances are that your first job after graduation will require you to move. No matter whether you move away from your college dorm, parent's home, or own rental, double check how far away your new job location is from your old residence. If the distance is <a href="https://www.irs.gov/uac/Moving-Expense-Deduction">at least 50 miles</a>, then the IRS allows you itemize several moving expenses, including:</p> <ul> <li>Transportation and storage of household goods and personal effects within any period of 30 days in a rows after date of move;<br /> &nbsp;</li> <li>Insurance for those household goods and personal effects before delivered to your new home;<br /> &nbsp;</li> <li>Out-of-pocket expenses for gas and oil or mileage at 23 cents a mile, in case you drive for the move; and<br /> &nbsp;</li> <li>Parking fees and tolls.</li> </ul> <p>Use <a href="https://www.irs.gov/pub/irs-pdf/f3903.pdf">Form 3903</a> to figure out whether or not you can deduct your moving expenses and what is your allowable moving expense deduction.</p> <h2>4. Withholding Too Much in Taxes</h2> <p>Whether you graduate in the spring, summer, or fall, you would expect to be employed fewer than 245 days (about eight months) during the current calendar year. In that case, you can ask your employer to use the <a href="https://www.irs.gov/publications/p505/ch01.html#en_US_2016_publink1000194430">part-year withholding method</a> so that less tax is withheld from each of your paychecks.</p> <p>IRS Publication 505 states that you must ask your employer in writing to use this method. In your letter, make sure to include these three items:</p> <ul> <li>Date of your last day of work for any prior employer during the current calendar year;<br /> &nbsp;</li> <li>Statement that you don't expect to be employed more than 245 days during the current calendar year; and<br /> &nbsp;</li> <li>Statement that you're using the calendar year as your tax year.</li> </ul> <p>If your employer approves your request, the HR department will use the regular percentage method tables from Publication 15 with adjustments for your part-year employment. This is the best way to maximize those first-year checks. Remember that you don't earn interest on refunds!</p> <h2>5. Miscalculating Student Loan Interest</h2> <p>Mom and Dad are always willing to lend you a helping hand and may have footed your student loan payments until you landed your first post-graduation job. In that case, and as long as you're not claimed as a dependent by your parents, you can deduct up to $2,500 of interest paid on qualifying student loans by them from your income subject to tax every year. Just make sure to let your parents know that they won't be able to deduct those interest payments from their own return.</p> <p>Even when you're making student loan payments yourself, you can still deduct up to $2,500 of the interest payments. To be eligible to claim this deduction in 2016, your modified adjusted gross income (MAGI) must be less than $80,000 if single, head of household, or qualifying widow(er), or $160,000 if married filing a joint return.</p> <p>To figure out your student loan interest deduction, check Form 1098-E from the institution that receives interest payments made on your behalf or paid by you. Your interest deduction is gradually reduced when your MAGI is between $65,000 and $80,000 ($130,000 and $160,000 if you file a joint return).</p> <p>Let's imagine that you paid $2,600 on interest for a qualified student loan throughout 2015. Assuming you file your return as single, here's how much you could deduct based on your 2015's MAGI:</p> <ul> <li><strong>MAGI is $50,000</strong>: You can deduct the full $2,500.<br /> &nbsp;</li> <li><strong>MAGI is $70,000:</strong> You need to phase out your student loan interest deduction using rules from <a href="http://www.irs.gov/publications/p970/ch04.html">IRS Publication 970</a>: $2,500 x ($70,00-$65,000)/$15,000 = $833.33. Your eligible student loan interest deduction would be $2,500 - $833.33 = $1,666.67.<br /> &nbsp;</li> <li><strong>MAGI is $85,000</strong>: You can't deduct any student loan interest payments.</li> </ul> <p><em>Have you made any of these tax mistakes?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">Don&#039;t Skip These 8 Tax Breaks for Students</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-borrow-student-loan-money-from-amazon-prime">Should You Borrow Student Loan Money From Amazon Prime?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">8 Tax Tricks to Try if You&#039;re Stuck With Student Loans</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Taxes abroad college grads deductions IRS moving expenses student loans students Tue, 12 Apr 2016 09:00:13 +0000 Damian Davila 1687443 at http://www.wisebread.com 4 Tax Mistakes New Parents Make http://www.wisebread.com/4-tax-mistakes-new-parents-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-tax-mistakes-new-parents-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/mom_dad_baby_000068517403.jpg" alt="New parents making common tax mistakes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Raising a child in America isn't cheap. CNNMoney and FutureAdvisor reported that it would cost $245,340 to raise a child born in 2013 from birth through age 18.</p> <p>That's a lot of money. But your children can actually save you dollars one time each year: When you're <a href="http://www.wisebread.com/5-important-tax-changes-for-2016">preparing your income taxes</a>. Kids come with some valuable tax deductions and credits. The problem? Many new parents, understandably overwhelmed with the burdens of taking care of a baby, fail to claim these savings.</p> <p>And that can cost them thousands of dollars. If you are a new parent, don't pass on these key tax savings.</p> <h2>1. Skipping the Child Tax Credit</h2> <p>The <a href="https://www.irs.gov/uac/Ten-Facts-about-the-Child-Tax-Credit">child tax credit</a>&nbsp;shouldn&rsquo;t be overlooked. If you had a new baby in 2015, whether through birth, adoption, or the foster care system, you can claim this additional $1,000 tax credit. It doesn't matter, either, on what day of the year you became a new parent. You can claim the credit even if you had your child on Dec. 31. Your child just needs to be younger than 17 at the end of the tax year in which you are claiming the credit.</p> <p>&quot;Having a baby gives you access to a tax bonus, and will help you reduce your taxable income,&quot; said David Hyrck, partner with New York City's Reed Smith. &quot;I see way too many new parents who overlook this child tax credit. Everyone needs to be doing this.&quot;</p> <p>There is one downside to the tax credit: It is nonrefundable if the credit is higher than your tax liability. Say you owe the government $500. Your $1,000 child tax credit will erase the money you owe the government. But you will lose the extra $500 that you could have claimed if you owed more than $1,000 on your tax bill.</p> <h2>2. Forgetting to Adjust Withholdings</h2> <p>Michael Eckstein, owner of Michael Eckstein Tax Services in Huntington, New York, says that new parents need to adjust the amount of money that their employers withhold from each of their paychecks for taxes.</p> <p>To do this, ask your employer for a new W-4 form. Once you have that form, indicate that you have a new child.</p> <p>Eckstein says that it's important to do this because children bring with them new deductions and credits. You should also tell your employer to reduce the amount of money you&rsquo;re withholding to account for these new tax benefits.</p> <p>If you don't, you will receive a larger tax refund. But remember: Getting a big refund isn't the goal. You'd rather have that extra money in your own hands with each paycheck. You can then use that money for important purchases, or you can invest it and watch it grow. That's a better alternative than giving it to the U.S. government for a full year.</p> <h2>3. Missing Out on Adoption Credits</h2> <p>If you became a new parent this year through an adoption, you're eligible for a significant federal tax credit of as much as $13,400. That's a big help with the high costs that can come with adopting.</p> <p>You don't have to use this tax credit in just one year, either. Say your bill for the 2015 tax year is $5,000. You can use $5,000 of the $13,400 tax credit and then save up the rest of the credit for future years. You can carry over any unused portion of the adoption tax credit for up to five years or until you use up all of the entirety of the credit, whichever comes first.</p> <p>To take this credit, your adopted child must be under 18 at the end of the tax year.</p> <h2>4. Skipping the Child and Dependent Care Credit</h2> <p>New parents should also investigate the <a href="https://www.irs.gov/taxtopics/tc602.html">child and dependent care credit</a>. This tax credit benefits parents who are working and must pay others to care for their children. To qualify for this credit, both you and your spouse must have earned money during the year from a job and must have paid someone to care for your child while you were working.</p> <p>Calculating how much you can claim for child care expenses is complicated, and depends on how much you spend on childcare, as well as your income. The maximum amount of expenses that you can claim for one child is $3,000, and for two or more children, $6,000.</p> <p><em>Are you making any of these parenting and tax mistakes?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/4-tax-mistakes-new-parents-make">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-miss-out-on-this-easy-way-to-pay-for-child-care">Don&#039;t Miss Out on This Easy Way to Pay for Child Care</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/does-your-kid-need-an-ira">Does Your Kid Need an IRA?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-bad-money-habits-youre-teaching-your-kids">4 Bad Money Habits You&#039;re Teaching Your Kids</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-time-management-skills-that-will-help-your-kid-win-at-school">10 Time-Management Skills That Will Help Your Kid Win at School</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-real-cost-of-adopting-a-baby">The Real Cost of Adopting a Baby</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Family adoption children deductions dependents kids new parents tax credits Mon, 14 Mar 2016 11:00:13 +0000 Dan Rafter 1665554 at http://www.wisebread.com Don't Skip These 8 Tax Breaks for Students http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/dont-skip-these-8-tax-breaks-for-students" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/female_student_000051988928.jpg" alt="Female student finding helpful tax deductions and breaks" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Dear students, I'm sure that you have heard the news: Every single year the average student loan debt per borrower is increasing. For example, the average class of 2015 graduate with student loan debt will owe a <a href="http://blogs.wsj.com/economics/2015/05/08/congratulations-class-of-2015-youre-the-most-indebted-ever-for-now/">little more than $35,000</a>.</p> <p>Still, there is a silver lining: College students and grads often qualify for significant tax breaks and deductions. To minimize your tax bill and increase your chances of a refund, here are eight tax deductions and breaks worth knowing about.</p> <h2>1. 529 Plans</h2> <p>If your parents or other donor started a 529 plan for you, you're in luck. Also known as qualified tuition programs, 529 plans allow individuals to save for education expenses on a tax-deferred basis and allow a designated beneficiary (ideally, that's you) to use those funds, including interest gains, for qualified expenses free of taxes or penalties.</p> <p>But few people know that you can also start a 529 plan for yourself. Yes, if you anticipate returning to school for any reason, you can save for related expenses in your own 529 plan &mdash; at any age. The list of qualified education expenses goes beyond tuition and academic fees, including expenses for room and board, transportation, equipment, and accommodations for individuals with special needs, so adults can benefit, too. (See also: <a href="http://www.wisebread.com/the-9-best-state-529-college-savings-plans?ref=seealso">The 9 Best State 529 College Savings Plans</a>)</p> <h2>2. Qualified IRA Distributions</h2> <p>Qualified distributions taken from a traditional IRA for use in qualified higher education expenses create no tax burden or penalty for you, assuming you only withdraw contributions, and not any earnings on the contributions. (Note: If your spouse, parent, or grandparent takes distributions from their own plans to fund your educational expenses, they would have to pay applicable income taxes on those funds, but don't have to pay the early distribution penalty which applies if under age 59 1/2.)</p> <h2>3. American Opportunity Credit</h2> <p>Replacing the Hope Scholarship credit, the <a href="http://www.irs.gov/Individuals/AOTC">American Opportunity Credit</a> allows you to cover up to $2,500 of undergraduate college costs, including:</p> <ul> <li>100% of your first $2,000 qualified education expenses; and<br /> &nbsp;</li> <li>25% of next $2,000 qualified education expenses.</li> </ul> <p>Keep in mind that you can claim the American Opportunity tax credit on your own academic expenses or on those of your spouse and kids. This means that you can claim up to $2,500 per student living in your household. However, to be eligible for the full credit, your modified adjusted gross income must be $80,000 or less (those making more receive a reduced amount of the credit).</p> <p>Another advantage of this tax credit is that 40% of it is refundable, meaning that the IRS will issue a refund for that amount even if you don't owe any federal income tax.</p> <h2>4. Lifetime Learning Credit</h2> <p>The <a href="http://www.irs.gov/Individuals/LLC">Lifetime Learning Credit</a> allows you to deduct up to 20% of your first $10,000 in qualified education expenses, up to $2,000 per taxpayer.</p> <p>Unlike the American Opportunity Credit, the Lifetime Learning Credit isn't refundable. You can use it to reduce any tax that you owe, but won't receive a refund for the unused portion when your tax bill is already zero.</p> <p>However, the Lifetime Learning Credit doesn't require you to be working towards a degree like the American Opportunity Credits does. A single class makes you eligible for this tax credit.</p> <p>To claim the American Opportunity and Lifetime Learning Credits, file <a href="http://www.irs.gov/pub/irs-pdf/f8863.pdf">Form 8863</a> with your federal return.</p> <h2>5. Business Deduction for Work-Related Education</h2> <p>The IRS allows you to deduct the costs of <a href="https://www.irs.gov/publications/p970/ch12.html#en_US_2015_publink1000178645">qualifying work-related education</a> as business expenses as long as the education is:</p> <ul> <li>Required by employer of by law;</li> <li>Necessary to maintain or improve skills; or</li> <li>Indispensable to meet minimum requirements.</li> </ul> <p>You can also deduct qualifying transportation and travel expenses necessary for completing the education. For example, you can deduct 57.5 cents per mile driven and 50% of meals when traveling overnight for education purposes throughout 2015.</p> <p>Make sure to keep all records, such as transcripts and catalogs of coursework, and receipts from all of your education expenses to provide sufficient support, especially in case of an IRS audit. A best practice is to obtain a statement from your employer providing details about your required education and reimbursements.</p> <p>For more details, consult Chapter 12 from <a href="http://www.irs.gov/pub/irs-pdf/p970.pdf">IRS Publication 970</a>.</p> <h2>6. Coverdell Education Savings Account</h2> <p>Students under age 18, or of any age with special needs, don't pay any tax on distributions from <a href="http://www.irs.gov/taxtopics/tc310.html">Coverdell Education Saving Accounts</a> for qualified education expenses at eligible institutions.</p> <p>While there is no limit on the number of Coverdell Education Savings Accounts that can be opened for the same beneficiary, the total cash contribution to all accounts on behalf of the beneficiary cannot exceed a total of $2,000 per year. Contributions can only be made in cash.</p> <h2>7. Education Savings Bond Program</h2> <p>Series EE bonds issued after 1989 and Series I bonds qualify for the <a href="http://www.irs.gov/publications/p970/ch10.html">Education Savings Bond Program</a>, allowing you to not pay tax on the interest earned on those U.S. savings bonds. While you can take the tax deduction for your own education, you must be at least 24 years old before the bond's issue date.</p> <p>For additional eligibility criteria, such as modified adjusted gross income tiers, consult Chapter 10 from IRS Publication 970.</p> <h2>8. Scholarship and Fellowship Grants</h2> <p>Last but not least, the IRS exempts students from any taxes on funds from scholarship or fellowship grants that don't exceed qualified education expenses or represent payment for teaching, research, or other services.</p> <p>To increase the combined value of educational credits and other types of educational assistance, the IRS recommends to coordinate Pell grants and other scholarships by including some or all of the additional assistance in income in the years it's received.</p> <p><em>What are other tax deductions and breaks available for students?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-freshman-shopping-tips-to-cut-college-costs">9 Freshman Shopping Tips to Cut College Costs</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-borrow-student-loan-money-from-amazon-prime">Should You Borrow Student Loan Money From Amazon Prime?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-money-saving-hacks-every-college-student-should-try">8 Money-Saving Hacks Every College Student Should Try</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">8 Tax Tricks to Try if You&#039;re Stuck With Student Loans</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Taxes 529 plans college credits deductions savings programs students Wed, 09 Mar 2016 10:30:27 +0000 Damian Davila 1668045 at http://www.wisebread.com 4 Tax Deductions New Homeowners Shouldn't Skip http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-tax-deductions-new-homeowners-shouldnt-skip" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_moving_boxes_000029693370.jpg" alt="Couple taking tax deductions they shouldn&#039;t skip" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You bought your first home this year. Even better, come tax day, <a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for">owning a home</a> can provide you with big financial rewards. That's because homeowners can claim several tax breaks that can shave thousands off your tax bill.</p> <p>But they won't help you if you don't claim them. Here is a list of the most important tax breaks for homeowners. To claim these, you'll have to itemize your taxes using IRS Form 1014 and Schedule A. This means that you'll no longer be able to quickly fill out your income taxes with the 1040EZ form.</p> <p>You'll find, though, that the extra work usually pays off with solid savings.</p> <h2>1. Mortgage Interest Deduction</h2> <p>When you first begin paying your mortgage, the bulk of your payments go toward interest, not the principal balance on your loan. The good news at tax time is that you can deduct the interest that you pay on your mortgage. These deductions can be sizable during your first years of owning a home.</p> <p>There is a limit, though, on interest deductions. You can't claim mortgage interest payments if your home loan is more than $1 million, but fortunately, that's not something that most new owners will have to worry about.</p> <p>Your lender will send you a Form 1098 each January. This form will list how much you paid in mortgage interest throughout the year. You then simply enter that number when filing your taxes.</p> <h2>2. Property Taxes</h2> <p>Depending on where you live, you might pay plenty in property taxes each year. Usually, you'll pay a portion of your yearly property taxes with each mortgage payment you make. You'll include extra dollars with your mortgage payment &mdash; in an amount determined by your lender &mdash; that your mortgage provider will then deposit in an escrow account. When your property taxes are due, your lender will pay them on your behalf from this account.</p> <p>Fortunately, you can deduct your property taxes each year, too. If you have an escrow arrangement with your mortgage lender, the amount you pay in property taxes will also be listed in the Form 1098 that they will send you in January.</p> <h2>3. Points</h2> <p>Did you pay your lender points to reduce your interest rate? If so, you might be able to deduct their cost, too.</p> <p>Buyers spend 1% of their home loan to buy a single point. Lenders allow buyers to purchase points as a way to lower their interest rate. The goal for buyers is to spend a bit upfront for a lower interest rate that guarantees them lower monthly payments for the life of their loan.</p> <p>If you did pay points, the amount you paid will again be listed in the Form 1098 that your lender sends to you.</p> <h2>4. Private Mortgage Insurance</h2> <p>Homeowners don't like paying for private mortgage insurance. This is no surprise. This insurance doesn't protect homeowners at all. Instead, it protects your mortgage lender in case you stop making your monthly payments.</p> <p>But you can deduct your private mortgage insurance premiums on your taxes, thanks to the new Protecting Americans From Tax Hikes Act of 2015. This recent piece of legislation preserves the deduction for private mortgage insurance for the 2015 and 2016 tax years.</p> <p>You'll have to pay for private mortgage insurance if the down payment you provided was less than 20% of your new home's purchase price. You can drop private mortgage insurance on conventional loans not insured by the federal government once your loan-to-value ratio hits 80%.</p> <p><em>Are you claiming all your real estate tax deductions?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">8 Tax Tricks to Try if You&#039;re Stuck With Student Loans</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-unbelievable-real-estate-tax-shelters-of-the-rich">3 Unbelievable Real Estate Tax Shelters of the Rich</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-millenials-should-invest-in-a-home">4 Reasons Millenials Should Invest in a Home</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Taxes deductions interest new homeowners pmi points tax breaks Fri, 04 Mar 2016 10:30:43 +0000 Dan Rafter 1666375 at http://www.wisebread.com The Easiest Way to Avoid a Tax Audit http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-easiest-way-to-avoid-a-tax-audit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_doing_taxes_000051800066.jpg" alt="Woman finding easy way to avoid tax audit" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>No one enjoys tax day. Filling out all those forms and checking those figures is a drag. But there's one thing worse than filling out your income taxes: an IRS audit.</p> <p>Here's the secret, though: There's no magic formula for avoiding an IRS audit. The only surefire way to never receive one of those ominous IRS letters is to be honest when completing your taxes. (See also: <a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a>)</p> <p>&quot;Any tax professional who gives you a list of audit triggers is selling snake oil,&quot; said Stewart Patton with U.S. Tax Services. &quot;They are simply trying to trump up their own personal experience into something universal, trying to position themselves as a unique soothsayer among mere mortals.&quot;&nbsp;</p> <h2>Your Tax Return Tells a Story &mdash; Make It Honest</h2> <p>Sam Brotman, a tax attorney with San Diego's Brotman Law, explains it like this: &quot;Every tax return tells a story,&quot; he said. &quot;The IRS audits people when that story does not match up.&quot;</p> <p>Brotman said that most filers believe that taking too many deductions will trigger an audit. But that's not necessarily true. Brotman said instead that who gets audited is based mainly on statistics.</p> <p>Your tax return contains what Brotman says is a &quot;treasure trove&quot; of information about who you are, what you do, and how you earn a living. The IRS then compares the information on your return with other people in your area who share similar attributes.</p> <p>The people who get audited are those that differ significantly from the norms, Brotman said. He gives this example: If you and all of your neighbors live in a neighborhood where everyone makes the same approximate level of income except for one or two people, the IRS is more likely to audit those two outliers.</p> <p>&quot;The biggest tip that I can give is to be honest about your deductions and your income,&quot; Brotman said. &quot;People who try to game the system are often unclear on how the IRS' statistical methods for auditing work and often end up getting audited anyway.&quot;</p> <h2>Avoid Basic Mistakes</h2> <p>That being said, there are certain mistakes that will increase your odds of an IRS audit. Venar Aya, a tax attorney with Southfield, Michigan's Ayar Law Group, said that those filers who make mathematical errors on their returns are more likely to get hit with an audit.</p> <p>&quot;All of your taxes are run through a computer, so if you botched the math somewhere along the line, it's going to trigger a red flag,&quot; Ayar said.</p> <p>Ayar recommends that filers triple check their numbers before sending off their taxes.</p> <p>You'll also increase your chances of an audit if you try to under-report your income, Ayar said. Remember, the companies that you work for will report what they've paid you to the IRS. If you try to hide that income, the IRS will find out, and it won't be happy.</p> <p>&quot;Part of the IRS' job is making sure you pay what you're supposed to,&quot; Ayar said. &quot;To be perfectly blunt, when it comes to filing your taxes, don't screw around.&quot;</p> <p>Ayar also pointed to charitable donations as a possible trouble area. It is good to donate to charity, and you should claim your charitable donations as deductions to help ease your tax burden, Ayar said. But you must accurately report the amount you donated. Trying to claim larger contributions than you actually made could raise the suspicions of the IRS.</p> <p>&quot;When you make a donation that is abnormally big in comparison to your income, that will raise some eyebrows,&quot; Ayar said.</p> <h2>Business Expenses Are Tricky</h2> <p>Deductions associated with running a business either full-time or part-time from your home can also make the IRS suspicious, said Dave Du Val, vice president of consumer advocacy at Citrus Heights, California-based TaxAudit.com.</p> <p>Yes, you want to deduct legitimate business expenses if you run a business from your home. But if you deduct too much, and if you tend to only deduct &quot;fun&quot; expenses such as a new digital camera, high-end smartphone, or ultra-expensive laptop computer, you just might trigger an IRS audit.</p> <p>Du Val recommends that consumers be careful, too, when deducting miles, airline flights, or hotels that they are claiming as business expenses. It all comes down to whether your business is truly a business and not a hobby, and whether the purchases you are deducting are actually business expenses.</p> <p>For instance, you can't really claim that trip to Disney World as a business expense if during your seven-day stay you only had one business meeting. And if you spent the other six days with your family in the Magic Kingdom? That's really not an appropriate business deduction.</p> <p>&quot;Ask yourself, is your business really a business according to the Internal Revenue Code?&quot; Du Val asked. &quot;If you have a business with little to no income for which you have been reporting a loss year after year, review the IRS' guidelines for determining if an activity is a business or hobby. Maybe it's time to stop reporting that hobby as a business.&quot;</p> <p><em>Have you ever fallen under the IRS' baleful gaze? What triggered the audit?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-the-tax-season-rush-with-these-early-prep-steps">Avoid the Tax Season Rush With These Early Prep Steps</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes audits business expenses deductions IRS red flags tax laws Wed, 24 Feb 2016 10:30:29 +0000 Dan Rafter 1659933 at http://www.wisebread.com The Toughest Tax Season Question All Married Couples Must Ask http://www.wisebread.com/the-toughest-tax-season-question-all-married-couples-must-ask <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-toughest-tax-season-question-all-married-couples-must-ask" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/married_couple_taxes_000030080560.jpg" alt="Married couple asking hardest question during tax season" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Tax day will be here sooner than you think, and you and your spouse want to claim as many credits and deductions as possible to lower your final tax bill. So, should you file jointly or separately?</p> <p>That depends. In the vast majority of cases, filing jointly provides married couples with the greatest amount of tax breaks.</p> <p>&quot;The 'married filing separately' status is generally the least beneficial of the filing statuses,&quot; said Luis Rosa, a financial advisor with LGR Financial in White Plains, New York. &quot;'Married filing separate' status loses the ability to claim some of the most common credits such as student loan interest, tuition and fees, child and dependent credits, and many others.&quot; (See also:&nbsp;<a href="http://www.wisebread.com/5-important-tax-changes-for-2016?ref=seealso">5 Important Tax Changes for 2016</a>)</p> <h2>Why Filing Jointly Is (Usually) the Smart Move</h2> <p>Couples who file their taxes jointly will be able to claim a standard deduction amount of $12,600 when preparing their 2015 income taxes this year. Married couples who file separately will each get a standard deduction of $6,300.</p> <p>Gail Rosen, a certified public accountant and president of Gail Rosen, CPA in Martinsville, New Jersey, gives a good example of how much married couples can save by filing jointly: If one spouse earns $75,000 of taxable income and the other earns $15,000, filing jointly instead of separately this April can save that couple $2,265 in taxes.</p> <p>Filing jointly is especially beneficial when one spouse earns significantly more than the other, Rosen said. That's because the averaging effect of combining the two incomes can bring some of the money that couples earned out of a higher tax bracket.</p> <p>Another big difference in filing jointly comes in the form of the extra tax credits that you can claim.</p> <p>When couples file jointly they might, depending on their financial circumstances, qualify for multiple tax credits, including the earned income tax credit, child and dependent care tax credit, Lifetime Learning education tax credit, and the American Opportunity Act education credit. If couples have adopted, they can also qualify for adoption tax credits. Married couples filing separately lose the ability to claim these potentially valuable credits.</p> <p>&quot;Most of the time, filing separately is not going to offer as many attractive incentives,&quot; said Nicole Erwin, with Tax Defense Network in Jacksonville, Florida. &quot;The types of deductions you would enjoy on a joint return may not be available, and your standard deduction is far lower when you file alone.&quot;</p> <h2>When Filing Separately Is the Right Move</h2> <p>While filing jointly is usually the right financial move, filing separately is a better financial choice for a smaller number of married couples.</p> <p>Rosen said that filing separately often makes sense when one spouse has a significant amount of medical expenses, casualty losses, or miscellaneous itemized deductions. You can deduct medical expenses only after they pass 10% of your adjusted gross income for the year. The same holds true for casualty losses. Miscellaneous itemized deductions, which include investment expenses, unreimbursed employee expenses, and the costs involved in hiring others to prepare your tax return, are deductible after their combined total exceeds 2% of your adjusted gross income.</p> <p>If these possible deductions are isolated on the return of just one spouse &mdash; which would happen when spouses are filing separately &mdash; then the couple would enjoy larger deductions. Rosen gives this example: If one spouse has $9,250 in medical expenses and the married couple's joint income is $90,000, then only $250 of these medical expenses can be deducted on a joint return. That's because 10% of $90,000 is $9,000, and $9,250 minus $9,000 comes out to $250.</p> <p>But if the income of the spouse with the medical expenses is only $15,000, and that spouse files separately, the deduction rises to $7,750. That's because 10% of $15,000 is only $1,500, and $9,250 minus $1,500 equals $7,750.</p> <p>Diane Vidal, an attorney with the Chester, New Jersey-based law firm of Iandoli &amp; Edens, said that filing separately can also offer spouses protection when they suspect that their partner is committing tax fraud.</p> <p>Vidal said that when married couples file separately, it's easier for one spouse to claim the &quot;innocent spouse syndrome.&quot; That's a term used in divorce law to bring relief to innocent spouses who had no idea that their spouses were engaging in shady IRS practices, Vidal said.</p> <p>But when couples file together, even spouses who had no clue that their partners were committing financial wrongdoings will most likely still be held accountable for their spouse's crimes. That's because the IRS will assume that when spouses file jointly, they both read and understood their filings. The IRS will then have the authority to pursue criminal action against both spouses.</p> <p>&quot;I truly believe that married couples, especially with those relationships that are on the rocks or heading toward a divorce, should file separately,&quot; Vidal said.</p> <p><em>Do you and your spouse file jointly or separately?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-toughest-tax-season-question-all-married-couples-must-ask">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">Don&#039;t Skip These 8 Tax Breaks for Students</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-unbelievable-real-estate-tax-shelters-of-the-rich">3 Unbelievable Real Estate Tax Shelters of the Rich</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit">The Easiest Way to Avoid a Tax Audit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes deductions marriage married filing jointly married filing separately Wed, 17 Feb 2016 10:30:28 +0000 Dan Rafter 1658023 at http://www.wisebread.com 11 Ways the Government Pays You to Live Green http://www.wisebread.com/11-ways-the-government-pays-you-to-live-green <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/11-ways-the-government-pays-you-to-live-green" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_riding_bikes_000063700085.jpg" alt="Couple finding ways the government pays them to live green" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Do you care about the planet? Do you care about saving money? Those ideas are not mutually exclusive.</p> <p>If you are environmentally conscious, it's worth knowing that you can &quot;live green&quot; and get help from the government to do so. Federal, state, and local governments offer tax breaks, credits, and straight cash payments to people who keep an eye on their carbon footprints.</p> <p>There is plenty of help available, and it's worth checking with the IRS and your state and local governments to see where you can save. Here are 11 big ways that governments will pay you to live green.</p> <h2>1. Cash for Burning Biomass</h2> <p>Forget the oil burner or electric heat pump. You can get government money by using a biomass stove, which burns things like wood, plants, grass, and even corn. There's a federal tax credit of up to $300 for stoves that use biomass, and some states have additional credits. (Maryland, for example, will rebate up to $700 for a new pellet burning stove.)</p> <h2>2. Tax Breaks for Electric Cars</h2> <p>Electric and hybrid vehicles are cool, but they often have a higher price tag than regular automobiles. So the federal government wants to help out by offering a tax credit of up to $7,500. Take that into account the next time you're eyeing a Tesla, Toyota Prius, or Nissan Leaf.</p> <h2>3. Incentives to Use Alternative Energy</h2> <p>There are are all kinds of incentives for you to electrify your home using something other than fossil fuels. There's a 30% federal tax credit for installing a geothermal heat pump, wind turbines, or solar panels, for example. There are also grant programs at the state and local level. The idea is that these credits will offset at least some of the relatively high cost of installing these systems, thus making it easier financially for homeowners to go green.</p> <h2>4. Money for a Home Energy Audit</h2> <p>There are some local governments that will give you cash just for an examination of how you use energy in your home. In most cases, you will get recommendations on ways to use less energy, but you can get the tax credit even if you don't make any changes. Takoma Park, MD offers $100 just to get the audit done.</p> <h2>5. Money for Windows, Doors, and Skylights</h2> <p>Sometimes getting new windows isn't just about making your house look pretty. If they exceed EnergyStar requirements for efficiency, you can get a tax credit of up to $500 on the cost. Good windows and doors can help keep out drafts and help heating and cooling systems work more efficiently. This credit also applies to new insulation and your roof.</p> <h2>6. Cash Back on Appliances</h2> <p>The federal government used to give credits for energy-efficient refrigerators and the like, but that's been phased out. However, there still may be localities that offer similar incentives for EnergyStar rated appliances. (See also:&nbsp;<a href="http://www.wisebread.com/13-small-kitchen-appliances-that-arent-worth-the-money">13 Small Kitchen Appliances That Aren't Worth the Money</a>)</p> <h2>7. Public Transit Subsidies</h2> <p>The federal government and some state governments encourage employers to offer a pre-tax benefit for workers who use public transportation to commute. Under the federal tax break, workers can reduce their taxable income by as much as $255 per month. The federal benefit also works for parking, so it's not entirely a &quot;green&quot; incentive. Some states (including California) allow workers to &quot;cash-out&quot; the parking benefit if they bike, walk, or carpool to work.</p> <h2>8. Bike-to-Work Incentives</h2> <p>The IRS allows employers to reimburse workers for up to $20 a month for expenses related to biking to work.</p> <h2>9. Tax Incentives for Your Home Office</h2> <p>The federal and state government want to make it easier for you to work from home. Many expenses related to having a home office, including equipment, furniture, and some utilities, can be tax deductible. In 2013, the IRS announced a &quot;simplified&quot; deduction that allows for up to $5 per square foot of space used as a home office (up to 300 square feet.) To qualify, you must have a space that is used &quot;exclusively&quot; for work.</p> <h2>10. Tax Deductions for Supporting National Parks</h2> <p>The National Park Service operates 59 parks, most of which are known for their natural beauty and prized by conservationists. If you're the type of person who likes to camp, hike, and climb, your donation to the National Park Foundation is tax-deductible. Additionally, the Park Service will offer free admission to parks on 16 dates in 2016.</p> <h2>11. Cash for Reclaimed Water</h2> <p>In many states, businesses can reduce their taxable income by using reclaimed wastewater, or so-called &quot;greywater.&quot; And homeowners in states including Arizona can get a tax deduction on equipment to allow for recycled water usage. &quot;Greywater&quot; is generally not good to drink, but can be used for toilets, crop irrigation, and other non-potable uses.</p> <p><em>Have you taken advantage of any of these eco incentives?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/11-ways-the-government-pays-you-to-live-green">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-the-courtesy-flush-dead">Is the courtesy flush dead?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/50-ways-to-have-free-outdoor-fun">50+ Ways to Have Free Outdoor Fun</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dumpster-diving-101-6-strategies-for-success">Dumpster-Diving 101: 6 Strategies for Success</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/only-celebrate-a-few-select-birthdays">Only Celebrate A Few Select Birthdays</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">Don&#039;t Skip These 8 Tax Breaks for Students</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Green Living Lifestyle Taxes alternative energy deductions electric cars environment incentives Wed, 20 Jan 2016 16:00:03 +0000 Tim Lemke 1639403 at http://www.wisebread.com 5 Important Tax Changes for 2016 http://www.wisebread.com/5-important-tax-changes-for-2016 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-important-tax-changes-for-2016" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000054433640.jpg" alt="Child learning important tax changes for 2016" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>What comes with a new year? Changes to the federal tax code, of course. And 2016 is no exception.</p> <p>These changes could mean big financial penalties if you don't have health insurance. Or they could bring you big savings if you happen to own a small business. Overall, the changes to the tax code that Congress enacted last year are beneficial to consumers, according to Dave Du, vice president of consumer advocacy at TaxAudit.com.</p> <p>&quot;With just days to go before the end of the year, Congress finally extended most of the tax breaks which were set to expire,&quot; Du said. &quot;Some of these provisions &mdash; like the definition of racehorse as property &mdash; won't impact too many of us, but there's much good news for taxpayers this year.&quot;</p> <p>One example? You can file later this year. The deadline for filing your income taxes this year is April 18 instead of April 15, thanks to something called Emancipation Day in Washington, D.C.</p> <p>Here are five other big tax changes you should be prepared for this year.</p> <h2>1. A Climbing Health Insurance Penalty</h2> <p>One of the bigger changes to the tax code this year is actually a punitive one: An increase in the penalty for not having health insurance that meets the requirements of the Affordable Care Act.</p> <p>Micah Fraim, a Roanoke, Virginia-based Certified Public Accountant, said that for the 2015 tax year &mdash; those are the taxes you'll be filing by April 18 &mdash; filers will have to pay a penalty of $325 for every uninsured adult and $162.50 for every uninsured dependent child, or 2% of your taxable income &mdash; whichever number is greater.</p> <p>That's a significant increase. For the 2014 tax year, those numbers stood at $95 and $47.50, or 1% of your taxable income. &quot;And in 2016, it gets even worse,&quot; Friedman said.</p> <p>For the 2016 tax year &mdash; the taxes you will file by April of 2017 &mdash; the penalty for not having insurance rises to $695 per adult and $347.50 per child, or 2.5% of your income. The message is clear: If you don't have acceptable health insurance, it's time to get it. (See also:&nbsp;<a href="http://www.wisebread.com/avoid-these-5-costly-health-insurance-mistakes">Avoid These 5 Costly Health Insurance Mistakes</a>)</p> <h2>2. New Health Insurance Forms</h2> <p>You can also expect to receive a new form or two in the mail relating to health insurance. If you've purchased health insurance through the federal government's Health Insurance Marketplace, you'll receive Form 1095-A. This isn't a change &mdash; the government began mailing this form out for the 2014 tax year.</p> <p>But there are two new health insurance forms for the 2015 tax year. Form 1095-B is a statement from your health insurance company verifying that you and other members of your household have insurance coverage that meets the requirements of the Affordable Care Act. This form is only sent to taxpayers who get their insurance from somewhere other than the Health Insurance Marketplace, such as from their employer. Form 1095-C is a statement from your employer that provides details about your employer-sponsored health benefits.</p> <p>Many taxpayers will receive both 1095-B and 1095-C, of course. The key fact to realize? You probably won't have to do anything with these forms, said Andrew Oswalt, Certified Public Account for Cedar Rapids, Iowa-based TaxACT.</p> <p>&quot;The new forms could be confusing because most people will think they have to do something with them,&quot; Oswalt said. &quot;The reality is, they'll simply need to mark a checkbox on their Form 1040 when filing and keep the forms 1095-B and 1095-C for their records.&quot;</p> <h2>3. A Tax Break for Small Business Owners</h2> <p>Priyanka Prakash, finance specialist at loan-search service FitBiz Loans, said that small business owners need to be aware of Section 179 of the tax code &mdash; a new tax law that lets them deduct up to $500,000 of qualifying equipment on their tax returns.</p> <p>To qualify for this deduction, the equipment must be used primarily for business purposes, Prakash said. The equipment must also have been put into use during the 2015 calendar year.</p> <p>&quot;This covers a wide range of equipment, from computers to furniture to business vehicles,&quot; Prakash said.</p> <p>Prakash gives this example: If a business purchases office equipment worth $100,000, it can then deduct that entire purchase amount on its taxes. If the business has a tax rate of 30%, Section 179 will save it $30,000 in taxes. Previously, business owners could only deduct a small amount every year based on the life of the equipment.</p> <p>&quot;Section 179 saves small businesses a lot of money,&quot; Prakash said.</p> <h2>4. A Break for College Students</h2> <p>Tom Wheelwright, a Certified Public Account and author of <a href="http://www.amazon.com/gp/product/1937832058/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=9325&amp;creativeASIN=1937832058&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=TFRKWZZ4OXTQ44N2" target="_blank">Tax-Free Wealth</a>, said that the 2015 tax year brought an important break for college students who are filing their own taxes or parents who claim these students as dependents.</p> <p>Congress made permanent the American Opportunity Tax Credit, which gives college students a credit of $2,500 per year for college tuition, fees, and course materials. Parents can claim the exemption for their college-age students as long as they claim these students as dependents on their income taxes.</p> <h2>5. A Boon for Heads of Household</h2> <p>The standard deduction is set to rise &mdash; a bit &mdash; for heads of households. The standard deductions that most taxpayers can claim in 2016 haven't risen for single taxpayers or married couples filing jointly or separately. Blame that on low inflation.</p> <p>But the standard deduction for taxpayers filing as the head of their households is going up a bit, rising $50 for 2016. That brings that standard deduction up to $9,300 in 2016.</p> <p><em>Are you ready for tax time this year?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-important-tax-changes-for-2016">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">7 Penalty-Free Ways to Withdraw Money From Your Retirement Account</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-choose-the-best-tax-preparer">How to Choose the Best Tax Preparer</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Top Three Tax Facts to Know for 2016</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes deductions filing health insurance IRS penalties tax breaks Tue, 19 Jan 2016 12:00:03 +0000 Dan Rafter 1639404 at http://www.wisebread.com Avoid the Tax Season Rush With These Early Prep Steps http://www.wisebread.com/avoid-the-tax-season-rush-with-these-early-prep-steps <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/avoid-the-tax-season-rush-with-these-early-prep-steps" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/smart_tax_planning_000059197820_0.jpg" alt="How to prep for tax season now" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's almost the holidays, which is fun! But that also means it's almost tax season &mdash; decidedly less fun. <a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Filing in 2016</a> might be tricky for some people, so here's how to prep now, and avoid the headache later.</p> <h2>How to Organize Your Documents</h2> <p>Make sure your <a href="http://www.wisebread.com/tax-document-checklist-what-to-gather-before-doing-your-taxes">basic tax documents</a> are ready to go.</p> <h3>1. W-2 Workers</h3> <p>Thankfully, these filings are the easiest. The most important item to save is your W-2 (most employers will mail them out between late December and February). Since you get a standard deduction of $5,000, it's unlikely that you need to keep any of your expenses. However, if your work-related expenses exceeded $5,000 in 2015, add them up and have all your receipts ready.</p> <h3>2. The Forgotten W-4</h3> <p>Do you routinely get huge tax refunds? If so, it's probably because you are withholding too much of your income. You can always fill out a new W-4 to change your tax withholding. Ask your human resources office for a form and for help, if you need it. When in doubt, ask your accountant how much you should be withholding from each paycheck, or visit the <a href="https://www.irs.gov/Individuals/IRS-Withholding-Calculator">IRS withholding calculator</a>. (Sorry, the answer is not &quot;zero!&quot;)</p> <h3>3. The Endless Sea of 1099s</h3> <p>Are you a freelance or contract worker hounding your employers for 1099s? Remember that you don't have to! Just report the income. The IRS won't penalize you for reporting more income than there are 1099s, but they will penalize you for having earned more money than you reported, should that be revealed. Asking your employer(s) for copies of said 1099s can also cause errors at the IRS, leading them to double what you actually earned.</p> <p>Also, be ahead of the dreaded 15% self-employment tax. Prepare your savings for tax season all year 'round. But if you haven't been, catch up now by saving 20% of your 1099 income between now and April. That should be enough to pay your tax preparer, the IRS, and have a little left in your savings to get the ball rolling for next year.</p> <h2>Things You Can Do to Lower Taxable Income</h2> <p>There are plenty of low-effort things you can to trim down your taxable income total, but also help you in the long run, including:</p> <h3>4. Make Charitable Donations By Year End</h3> <p>Some great charities include: The Boys &amp; Girls Club, PBS, The Heifer Project, or nearly anything on <a href="http://www.donorschoose.org/">DonorsChoose.org</a>.</p> <h3>5. Increase Retirement Deferrals</h3> <p>Up your 401K or IRA from the standard vestment to 10%&ndash;15% for a few months. That'll be taken from your income before taxes.</p> <h3>6. Add Deductions Sooner Rather Than Later</h3> <p>This will help avoid lost or forgotten expenses. Flag the charges on your bank statements the second you realize they're business or work expenses. Remember to include job hunting expenses and any home appliances you also use for work.</p> <h3>7. Have Kids? Consider Opening a 529 Account</h3> <p>Get a start on saving for college. You'll receive a tax subsidy, and in some states, you can get a tax credit or deduction for your contributions to a 529 account.</p> <h3>8. Claim Part of Your Rent or Mortgage as a Home Office</h3> <p>Do you work from home? If so, you can claim up to 25% of you rent or mortgage payment as a home office. Ask your accountant to add that to your deductions.</p> <h2>Avoid IRS Penalties</h2> <p>You think you're doing everything right, and then you get slapped with a <a href="http://www.wisebread.com/avoid-irs-penalties-with-this-simple-estimated-payment-strategy">tax penalty</a>, or worse, an audit. Play by the rules to sidestep hazards.</p> <h3>9. Don't Omit Any Income</h3> <p>Always report income, whether it's inheritance, an unsent 1099, or any other source. It's never illegal to over-report, but it's definitely illegal to under-report! Be sure you beef up your deductions to make up for the income and you'll be fine.</p> <h3>10. Make Sure You're Signed Up for Health Care</h3> <p>The Affordable Care Act means healthcare within reach for everyone, but it also means you need to do your due diligence and sign up for health care or you will <a href="http://www.wisebread.com/going-without-health-insurance-in-2015-heres-what-itll-cost-you">face more taxes</a>. This can be hard for the millions of people who have been without health care for most of their adult lives, but it's <a href="http://www.wisebread.com/how-to-take-advantage-of-obamacare-for-less-financial-risk-and-more-freedom">actually not difficult</a>.</p> <h3>11. Make Your Appointment Early</h3> <p>Got a good accountant or tax preparer? Chances are s/he is also a very popular accountant. Get an appointment on the books as soon as possible. Not only does this mean you won't get pinged for a late tax filing, but having the appointment set in stone will force you to get organized faster.</p> <p><em>How are you getting ready for tax season?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amanda-meadows">Amanda Meadows</a> of <a href="http://www.wisebread.com/avoid-the-tax-season-rush-with-these-early-prep-steps">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit">The Easiest Way to Avoid a Tax Audit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes 1099 deductions IRS savings W2 year end Tue, 17 Nov 2015 14:15:18 +0000 Amanda Meadows 1613391 at http://www.wisebread.com 5 Signs You Probably Need an Accountant http://www.wisebread.com/5-signs-you-probably-need-an-accountant <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-signs-you-probably-need-an-accountant" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000021395191.jpg" alt="Woman learning she probably needs an accountant" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Do you dread filing your income taxes each year? Does preparing your taxes take weeks of your time? And once you've sent your papers to the IRS, do you have the sneaking suspicion that you might not have taken all the deductions to which you are entitled?</p> <p>You might need to hire an accountant.</p> <p>&quot;Hiring an accountant depends on whether your knowledge, time, and money are best spent on bookkeeping, loan application, and tax preparation, or whether you have higher priorities,&quot; says Valrie Chambers, associate professor of taxation and accounting at Stetson University in Celebration, Florida. &quot;A business owner who excels at sales should probably use her time increasing sales rather than learning and doing accounting. That strategy is just more profitable for the business.&quot;</p> <p>Here are five signs that you need to hire an accountant.</p> <h2>1. You Owe the Government a Lot of Money Each Year</h2> <p>Taxes become complicated when you work for yourself or run your own business. Depending upon how much you earn, you'll have to pay estimated quarterly tax payments four times every calendar year &mdash; January 15, April 15, June 15, and September 15. These payments are supposed to guarantee that you won't owe the federal and state governments thousands of dollars each year in taxes.</p> <p>But if you find that when you file your income taxes each April 15 you do owe the state and federal government $3,000, $4,000, $6,000, or more, you're doing something wrong. An accountant can help you determine the quarterly tax payments you should be making to ensure that you're not hit with a huge tax bill every April 15.</p> <h2>2. You're Worried That You're Missing Big Deductions</h2> <p>Yes, hiring an accountant takes money. But doing so can also <em>save </em>you money. An accountant can prepare your annual income tax returns to make sure that you're not missing out on any important deductions for your household or your business. Missed deductions can cost you thousands of dollars each year in taxes.</p> <h2>3. It Takes You Days to Complete Your Taxes</h2> <p>Filing your <a href="http://www.wisebread.com/5-clever-tax-shelters-anyone-can-use">income taxes</a> isn't necessarily easy. But it shouldn't be a draining chore, either. If your life has gotten complicated &mdash; maybe you've started your own consulting business on the side, perhaps you've adopted and are struggling to understand how the adoption tax credit works, maybe you're not sure how to deduct the bills for a serious medical procedure &mdash; you can bet that your income taxes have, too.</p> <p>If it is taking you a full week to complete your taxes, it might be time to think about hiring an accountant. You just have to determine how important your time is: Would you rather spend your time earning more money or poring over your tax forms?</p> <h2>4. You Own Rental Real Estate</h2> <p>Renting an apartment or two is a great way to earn passive income. But doing so can also complicate your finances. That's why it makes sense to hire an accountant to make sure that you don't miss any important tax deductions related to rental income, and that you file all the paperwork necessary when working as a landlord.</p> <p>&quot;There comes a point when personal tax software is not sophisticated enough to take into account the complexities of real estate investments,&quot; says David Reiss, professor of law and research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School in New York City. &quot;If a taxpayer has multiple properties that have both a personal and investment component, tax software may not be able to accept all of the relevant inputs and generate the correct output.&quot;</p> <h2>5. You've Never Been Able to Balance Your Checkbook</h2> <p>If you're struggled for years to balance your own checkbook &mdash; if overdraft charges from your bank aren't a rare enough occurrence &mdash; it might be time to invest in an accountant, especially if you've started your own business. It's bad enough to struggle with your personal finances, and you don't want to operate a business that doesn't have its books balanced.</p> <p>Chambers recommends that you meet with several accountants &mdash; she recommends that you only work with Certified Public Accountants (CPAs) &mdash; before hiring one. Ask accountants how long they've been in business, whether they've worked with clients at your income level, how much they charge, and what services they'll provide. Ask, too, for referrals from accountants' current clients.</p> <p>&quot;Meet with the CPA to see if you are comfortable sharing your information with this firm,&quot; Chambers says. &quot;CPAs should be forthcoming about their fees. When they are hired, they normally spell out what they will do for those fees in an engagement letter. Finding an accountant who is right for you is part research, part comfort level.&quot;</p> <p><em>When did you realize that you needed an accountant?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-the-tax-season-rush-with-these-early-prep-steps">Avoid the Tax Season Rush With These Early Prep Steps</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit">The Easiest Way to Avoid a Tax Audit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes accountants cpas deductions finance income taxes IRS self-employment Tue, 13 Oct 2015 13:00:32 +0000 Dan Rafter 1586108 at http://www.wisebread.com 3 Unbelievable Real Estate Tax Shelters of the Rich http://www.wisebread.com/3-unbelievable-real-estate-tax-shelters-of-the-rich <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-unbelievable-real-estate-tax-shelters-of-the-rich" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000019372518.jpg" alt="Learning real estate tax shelters of the rich" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's no secret that the rich often take <a href="http://www.wisebread.com/5-clever-tax-shelters-anyone-can-use">advantage of tax shelters</a> and loopholes to minimize their expenses. But some tax loopholes offer a shocking advantage to those who have enough money to exploit them. Here are a few of our favorites.</p> <h2>Investments in Rural Land</h2> <p>Why go small when you can go big? If you can afford it, buy a few acres of rural land. All except one of the 50 states have what's called &quot;use-value assessment,&quot; which allows land-buyers to purchase land and sell it at its assessed &quot;use-value&quot; rather than the fair market value, as with other types of real estate &mdash; as long as you comply with a few minor guidelines.</p> <p>The IRS provision was originally created to help farmers hold on to their land. But according to <em>The Nation</em>, the rich are <a href="http://www.thenation.com/article/tax-day-farms-owned-rich-provide-massive-tax-shelter/">using it as a tax shelter</a>. In 2011, Michael Dell reportedly qualified his $71.4 million 1,757-acre Texas ranch for the tax credit and brought its assessed value to $290,000. They say it takes money to make money, but that kind of tax savings seems more than a bit excessive.</p> <h2>1031 Exchanges</h2> <p>The rich can often offset real estate capital gains or losses with a 1031 Exchange. Section 1031 of the Internal Revenue Code is a provision that allows real estate investors to sell property, take a profit, and defer capital gains or losses as long as the proceeds are reinvested in similar use property.</p> <p>Not all real estate transactions qualify for 1031s. In order to receive this special tax treatment, the property must be used for trade, business, or investment purposes. Most investors use 1031s to build long-term tax-deferred wealth. There is no limit on the number of 1031 Exchanges you can do. As an example, an investor buys Building A for $300,000. He turns around and sells it for $450,000. That's a profit of $150,000. At the time of the sale, he will owe taxes on the profit. But, if he were to do a 1031 Exchange, he can take the entire $450,000 and invest it in much more expensive Building B, without paying tax. He can again repeat this process for the purchase of Buildings C, D, E, and so on.</p> <h2>Dynasty Trusts</h2> <p>Dynasty Trusts are a form of irrevocable trust used by wealthy families to create generational wealth. With properly formed trusts, your descendants remain exempt from estate, gift, and generation-skipping (GST) tax for the life of the trust.</p> <p>There are two ways to fund the trust &mdash; while you're alive, or upon your death. In either case, your assets, such as real estate property, stocks, bonds, life insurance, etc. are placed within the trust and protected by its provisions. The trust allows your assets to grow exponentially and into infinity in most cases, but are subject to income and capital gains tax either while you're alive or at your death, unless the trust is created in a state that does not impose these taxes &mdash; such as Texas, Nevada, or Florida, for example. That's where the possibility of huge tax savings occurs.</p> <p>Individual states have their own rules governing Dynasty Trusts. If you're interested in transferring real estate and other assets to a trust, please be advised that these are complicated agreements and you should seek the services of an estate planning attorney.</p> <p>If purchasing 10 acres of rural land, 1031 Exchanges, and Dynasty Trusts are not in your immediate pathway to wealth, but perhaps homeownership and real estate investing are. And as you're on your journey, remember these real estate tax shelters of the wealthy &mdash; you might need them someday.</p> <p><em>Would you take advantage of these tax ruses if you could?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/3-unbelievable-real-estate-tax-shelters-of-the-rich">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">Don&#039;t Skip These 8 Tax Breaks for Students</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-ways-the-government-pays-you-to-live-green">11 Ways the Government Pays You to Live Green</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Taxes 1031 exchanges deductions dynasty trusts rich people rural land tax shelters wealth Thu, 08 Oct 2015 13:00:42 +0000 Qiana Chavaia 1580007 at http://www.wisebread.com 5 Clever Tax Shelters Anyone Can Use http://www.wisebread.com/5-clever-tax-shelters-anyone-can-use <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-clever-tax-shelters-anyone-can-use" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_gold_piggy_bank_000059335918.jpg" alt="Man finding easy ways to reduce tax burden" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>For the middle-class, building wealth for your family can be like constructing a house &mdash; the biggest challenge is setting the foundation. And it starts with keeping your taxes as low as possible. This can sometimes result in relocating to an area where the cost of living and taxes are more affordable, trading high-cost districts in areas like New York City and San Francisco for a more sustainable lifestyle in an area where the job market is strong, like in Houston or Dallas.</p> <p>But there are other smart, easy ways to <a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">reduce your tax burden</a>, too. Read on to familiarize yourself with a few.</p> <h2>1. Avoid Personal and Business Income Tax</h2> <p>You won't have to worry about paying personal state income tax if you live in one of these nine U.S. states: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. And you will avoid corporate income tax if you do business in the states of Nevada, South Dakota, Texas, or Wyoming.</p> <h2>2. Take Advantage of Retirement Plans</h2> <p>Most people start saving for retirement once they land their first &quot;real&quot; job by contributing to employer-sponsored plans. Some employers will match as much as 100% of your 401(k) contributions up to 3% of your salary. That's a guaranteed 100% return of your investment! So, let's say you've contributed $3,500 &mdash; your employer will put in another $3,500. There isn't another investment that can guarantee this type of return. Plus, if historical average stock market returns are any indication, your money will likely grow an average 8%&ndash;12% per year tax-free or tax-deferred. Meanwhile, investing in your 401(k) will reduce your annual income and possibly your tax bracket, further reducing your tax burden.</p> <h2>3. Contribute to a 529 College Savings Plan</h2> <p>Qualified Tuition Programs (QTPs), often referred to as 529 Plans, are tax shelters that allow you to save for higher education expenses. In many ways, they resemble retirement plans, offering tax-deferred growth on contributions. Plans vary and have different lifetime contribution limits &mdash; generally around $200,000 &mdash; but there is no federal tax on earnings, and often no state tax if your plan's beneficiary chooses an in-state college.</p> <h2>4. Avoid Estate and Inheritance Tax</h2> <p>The estate and inheritance tax doesn't affect many people, because you're not required to file an estate tax return unless your estate is valued at $5,430,000 or more as of 2015 &mdash; and only six states levy their own inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. And the transfer of property through an estate or inheritance is taxed only in Nebraska and Pennsylvania. Consider yourself lucky &mdash; unless you've got a very sizeable estate, your progeny will probably be spared this tax blow.</p> <h2>5. Buy a Home</h2> <p>When you purchase a home, you can deduct interest paid on your mortgage, a percentage of your real estate taxes and depreciation, and receive credits for certain home improvements. Not a bad deal. But if you're in the business of flipping real estate, it gets even better, because when you sell a property, any profit of under $250,000 (for single tax filers) is tax-free. That amount doubles to $500,000 if you're married and filing jointly. The only requirement the IRS has is that you occupy the home as your principal residence for at least two years before you sell.</p> <p><em>What other easy tax shelters do you employ?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/5-clever-tax-shelters-anyone-can-use">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-money-moves-to-make-the-moment-you-get-a-promotion">8 Money Moves to Make the Moment You Get a Promotion</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">Don&#039;t Skip These 8 Tax Breaks for Students</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes charitable donations deductions mortgage retirement tax credits Wed, 05 Aug 2015 13:00:14 +0000 Qiana Chavaia 1508985 at http://www.wisebread.com 7 Surprising Tax Deductions You Might Miss http://www.wisebread.com/7-surprising-tax-deductions-you-might-miss <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-surprising-tax-deductions-you-might-miss" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_dog_000023943461.jpg" alt="Woman takes surprising tax break for being pet owner" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's getting serious: We're just days away from the tax filing deadline. If you haven't filed your taxes yet, your procrastination may pay off in spades. Here are some surprising deductions that you may be able to take this tax year. (See also: <a href="http://www.wisebread.com/get-a-bigger-refund-with-these-often-overlooked-tax-deductions?ref=seealso">Often Overlooked Tax Deductions</a>)</p> <h2>1. Professional Enhancement</h2> <p>Are any of your expenses related to your work? For example, if you're a music teacher, consider everything you do that enhances the knowledge that you communicate to your students. Do you attend concerts or musicals? Are you taking lessons to brush up your own music skills? These types of costs, while largely recreational and enjoyable, may also be tax deductions if you can show how they translate to your career.</p> <h2>2. Caring for Community Service Animals</h2> <p>While you could set bait and traps to keep pests such as snakes, rats, and other dangerous critters at bay, you could also use more natural methods such as caring for outdoor cats who take care of these pests for you. Believe it or not, the food that you feed these animals is a tax-deductible expense because these animals help make your property (and the community) safer by eliminating harmful pests.</p> <h2>3. Fostering Adoptable Animals</h2> <p>If you're an animal lover who fosters critters prior to adoption, your good deed will be rewarded in more ways than one. Many major animal charities and local shelters have foster programs. With proper documentation from the charity, you may be able to write off all of the expenses incurred when fostering animals, including food and any veterinary bills.</p> <h2>4. Company Giveaways</h2> <p>If you're a business owner, you know that promotional giveaways can often boost sales. The costs of these freebies and promotional items can often be deducted as business expenses because they helped promote, and hopefully grow, your business.</p> <h2>5. Volunteering</h2> <p>It can be tough to carve out the time and budget to volunteer &mdash; for example, if you have kids, you have to arrange for a sitter. The good news is that even though you're paying a sitter (and not making a direct donation to the nonprofit), the cost of the sitter is a tax deduction because it enabled you to volunteer your time and effort to the charity.</p> <h2>6. Volunteer Vacation</h2> <p>Volunteer vacations are a great way to immerse yourself in a culture and have a unique travel experience. Many organizations provide these types of trips. They coordinate housing, in-country cultural activities, and even pay for emergency insurance. Many of the expenses, including the donation you usually make to the nonprofit, can be deducted from your taxes because incurring these expenses enabled you to do the volunteer work.</p> <h2>7. Home Improvements for Medical Reasons</h2> <p>If your doctor advises you to get more exercise or make changes to your home for specific medical reasons, those costs may be tax deductible. That means adding in a gym, fitness equipment, or even a swimming pool if it's used for prescribed medical purposes, may qualify as a tax deduction.</p> <p>As always, please check with your tax preparer to see if you qualify for certain tax deductions. Make sure that you keep precise records of all these expenses and any supporting documentation. Remember, taxes must be filed by April 15th!</p> <p><em>Do any of these deductions apply to your tax situation?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/christa-avampato">Christa Avampato</a> of <a href="http://www.wisebread.com/7-surprising-tax-deductions-you-might-miss">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-the-tax-season-rush-with-these-early-prep-steps">Avoid the Tax Season Rush With These Early Prep Steps</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-ways-the-government-pays-you-to-live-green">11 Ways the Government Pays You to Live Green</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-toughest-tax-season-question-all-married-couples-must-ask">The Toughest Tax Season Question All Married Couples Must Ask</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/tax-deductions-to-start-thinking-about-now">Tax Deductions to Start Thinking About Now</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes animals community service deductions expenses home improvements volunteering Mon, 06 Apr 2015 13:00:03 +0000 Christa Avampato 1367916 at http://www.wisebread.com Don't Miss These 7 Great Tax Deductions for Parents and Caretakers http://www.wisebread.com/dont-miss-these-7-great-tax-deductions-for-parents-and-caretakers <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/dont-miss-these-7-great-tax-deductions-for-parents-and-caretakers" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/caretaker_000039736250.jpg" alt="Caretaker discussing tax deductions while at work" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>April 15th will forever be synonymous with an-often dreaded American obligation: filing our income taxes. It can, and often is, a tedious process that we put off for as long as possible. As you wade through a sea of W-2s, 1099s, and deduction paperwork, parents and caretakers should be aware of the following deductions and claim them if and when they apply.</p> <h2>1. Home Modifications</h2> <p>Certain health challenges require home modifications, such as making a bathroom accessible or adding ramps in place of stairs. These expensive modifications can often be deducted from your taxes if without them you wouldn't be able to care for your dependents.</p> <h2>2. Basic Living Expenses</h2> <p>Provided that <a href="http://www.aarp.org/home-family/caregiving/info-02-2013/6-tax-tips-for-family-caregivers.html">basic living expenses</a> such as specialized food, housing, and clothing are medically necessary for your dependents, you may be able to take them as deductions. It's important to note that these expenses are not tax-deductible based on personal preferences. They must be substantiated as required expenses by medical professionals. Make sure that you have paperwork in your files that proves this to be the case in the event that you are audited.</p> <h2>3. Health Care</h2> <p>Once health care costs exceed a certain percentage of your income, it can be taken as a deduction. This includes your own personal health care costs, as well as those of your dependents.</p> <p>If you're caring for a loved one who is ill, these costs can be steep, and you should investigate whether they meet the deduction threshold. This includes out-of-pocket costs for hospitalization, copays, medications, dental care, deductibles, ambulances, bandages, eyeglasses, long-term care costs, alternative medicine, adaptors for TVs and telephones for hearing impairment, smoking cessation, weight loss programs, and wigs that compensate for hair loss. Remember, these costs must be medically necessary or caused by a medical condition, and not just a matter of convenience or preference.</p> <h2>4. In-Home Care for the Disabled</h2> <p>If the care of your loved one requires live-in help or a day- or night-time aide, then the cost of that help may be deductible. It depends upon your income, the cost of the care, and your other dependent care expenses. This credit would be bucketed under the &quot;child and dependent care expenses&quot; deductible. This is a very defined term when it comes to taxes, and there are specific <a href="https://turbotax.intuit.com/tax-tools/tax-tips/Family/Tax-Tips-for-Caring-for-a-Disabled-Spouse/INF27737.html">disability criteria</a> you must meet to take this deduction.</p> <h2>5. Child Care</h2> <p>If your dependent is under 13 years old and you paid for a daycare center, summer camp, or babysitter, a portion of those costs may be deducted on your taxes. There are stipulations around your employment status, the expenses you incur, and how many children you have that dictate if and how much you may <a href="https://turbotax.intuit.com/tax-tools/tax-tips/Family/Deducting-Summer-Camps-and-Daycare-with-the-Child-and-Dependent-Care-Credit/INF22238.html">deduct child care expenses</a>.</p> <h2>6. Student Loan Interest</h2> <p>If you paid interest on the student loans of your dependents, that interest may be tax-deductible. You can take this deduction if your income is below a certain dollar amount, even if you don't itemize your taxes. The IRS provides a complete and thorough explanation of <a href="http://www.irs.gov/publications/p970/ch04.html">student loan interest deductions</a> on its website.</p> <h2>7. Transportation</h2> <p>When you are caring for a loved one, transportation can also be a deductible expense. Like many of the other things listed above, these transportation costs must be medically necessary to serve as deductions.</p> <p>Whenever caregiving is involved, I always encourage people to seek the advice and assistance of a tax professional, such as an accountant. These laws and guidelines are complicated, and in the event that you are audited, it's important to have all of the paperwork to prove and justify these expenses. With the filing deadline less than a month away, now is the time to get everything in order.</p> <p><em>Which deductions for parents or caretakers will you be using?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/christa-avampato">Christa Avampato</a> of <a href="http://www.wisebread.com/dont-miss-these-7-great-tax-deductions-for-parents-and-caretakers">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">Don&#039;t Skip These 8 Tax Breaks for Students</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">8 Tax Tricks to Try if You&#039;re Stuck With Student Loans</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-ways-the-government-pays-you-to-live-green">11 Ways the Government Pays You to Live Green</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes caregiving childcare deductions dependents disabled healthcare Thu, 26 Mar 2015 13:00:11 +0000 Christa Avampato 1356049 at http://www.wisebread.com