Archive for February, 2014

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Deducting Medical and Dental Expenses

Wednesday, February 26th, 2014

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

Deducting Medical and Dental Expenses

 

If you plan to claim a deduction for your medical expenses, there are some new rules this year that may affect your tax return. Here are eight things you should know about the medical and dental expense deduction:

1.   AGI threshold increase.  Starting in 2013, the amount of allowable medical expenses you must exceed before you can claim a deduction is 10 percent of your adjusted gross income. The threshold was 7.5 percent of AGI in prior years.

2.   Temporary exception for age 65.  The AGI threshold is still 7.5 percent of your AGI if you or your spouse is age 65 or older. This exception will apply through Dec. 31, 2016.

3.   You must itemize.  You can only claim your medical and dental expenses if you itemize deductions on your federal tax return. You can’t claim these expenses if you take the standard deduction.

4.   Paid in 2013. You can include only the expenses you paid in 2013. If you paid by check, the day you mailed or delivered the check is usually considered the date of payment.

5.   Costs to include.  You can include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Any costs reimbursed by insurance or other sources don’t qualify for a deduction.

6.   Expenses that qualify.  You can include the costs of diagnosing, treating, easing or preventing disease. The cost of insurance premiums that you pay for policies that cover medical care qualifies, as does the cost of some long-term care insurance. The cost of prescription drugs and insulin also qualify. For more examples of costs you can deduct, see IRS Publication 502, Medical and Dental Expenses.

7.   Travel costs count.  You may be able to claim the cost of travel for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 24 cents per mile for 2013.

8.   No double benefit.  You can’t claim a tax deduction for medical and dental expenses you paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.

Publication 502 is available on IRS.gov or you can order it by calling 800-TAX-FORM (800-829-3676).
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Taxable or Non Taxable Income???

Wednesday, February 12th, 2014

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice

IRS Tips about Taxable and Nontaxable Income

 

Are you looking for a hard and fast rule about what income is taxable and what income is not taxable? The fact is that all income is taxable unless the law specifically excludes it.

Taxable income includes money you receive, such as wages and tips. It can also include noncash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance proceeds paid to you are usually not taxable. But if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
  • Income from a qualified scholarship is normally not taxable. This means that amounts you use for certain costs, such as tuition and required books, are not taxable. However, amounts you use for room and board are taxable.
  • If you got a state or local income tax refund, the amount may be taxable. You should have received a 2013 Form 1099-G from the agency that made the payment to you. If you didn’t get it by mail, the agency may have provided the form electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some types of income that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

For more on this topic see Publication 525, Taxable and Nontaxable Income. You can get it at IRS.gov or call to have it mailed at 800-TAX-FORM (800-829-3676).

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Eight Opportunities For Parents To Reduce Their Federal Taxes

Tuesday, February 11th, 2014

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

Eight Tax Savers for Parents

 

Your children may help you qualify for valuable tax benefits. Here are eight tax benefits parents should look out for when filing their federal tax returns this year.

1.   Dependents.  In most cases, you can claim your child as a dependent. This applies even if your child was born anytime in 2013. For more details, see Publication 501, Exemptions, Standard Deduction and Filing Information.

2.   Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17 at the end of 2013. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more about both credits, see the instructions for Schedule 8812, Child Tax Credit, and Publication 972, Child Tax Credit.

3.   Child and Dependent Care Credit.  You may be able to claim this credit if you paid someone to care for one or more qualifying persons. Your dependent child or children under age 13 are among those who are qualified. You must have paid for care so you could work or look for work. For more, see Publication 503, Child and Dependent Care Expenses.

4.   Earned Income Tax Credit.  If you worked but earned less than $51,567 last year, you may qualify for EITC. If you have three qualifying children, you may get up to $6,044 as EITC when you file and claim it on your tax return. Use the EITC Assistant tool at IRS.gov to find out if you qualify or see Publication 596, Earned Income Tax Credit.

5.   Adoption Credit.  You may be able to claim a tax credit for certain expenses you paid to adopt a child. For details, see the instructions for Form 8839, Qualified Adoption Expenses.

6.   Higher education credits.  If you paid for higher education for yourself or an immediate family member, you may qualify for either of two education tax credits. Both the American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000. See Publication 970, Tax Benefits for Education.

7.   Student loan interest.  You may be able to deduct interest you paid on a qualified student loan, even if you don’t itemize deductions on your tax return. For more information, see Publication 970.

8.   Self-employed health insurance deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child under the Affordable Care Act. It applies to children under age 27 at the end of the year, even if not your dependent. See Notice 2010-38 for information.  

Forms and publications on these topics are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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Is It Finally Time To Have A Tax Preparer Prepare Your Tax Returns?

Wednesday, February 5th, 2014

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

For several years now the key provisions of many of the Federal income tax laws are continuously being changed each year.  Some of the changes are minor, others are not.  It is reasonable to expect that more annual tax law changes will be forthcoming for the remainder of this decade as the Federal government attempts to reduce the trillion-dollar budget deficit by increasing tax revenues.  You can also expect that the complexity of the income tax laws will be concurrently changed.  Most tax practitioners share the view that the current Federal administration is focused on increasing the taxes for those taxpayers who are in the higher income tax brackets, especially if your combined annual family income, from all sources, is above $200,000.00/year.  It is possible for this income threshhold to be lowered in the future. 

Tax preparers are required by both Federal and State regulations to continuously stay abreast of most tax law changes, but they must also be knowledgeable of all the tax law changes that will affect their tax clients.  While a tax preparer can prepare your tax returns for you, a tax practitioner can can also analyze your current tax situation and then provide you with options and recommendations to reduce your annual tax liability.

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