Posts Tagged ‘Tax Credits’

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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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Be Sure To Check Your Tax Credits Before You File Your Tax Return!

Thursday, March 1st, 2012

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

 Congress regularly changes the provisions of the U.S. Tax Code for different reasons.  One reason is to provide an offset to your income tax liability which is in the form of a “tax credit” which is similar to and almost as important as a credit posted to your credit card account.  Both reduce the amounts that you owe to either the taxing authority (Internal Revenue Service) or your credit card company.  You’ll never have too much of either!  Insofar as “tax credits” are concerned, they are classified as “refundable” or non-refundable”. 

Refundable tax credits are the best.  For example, if you do not owe any income taxes but you have a $2,000.00 refundable tax credit, you’ll receive a tax refund of $2,000.00.  However, in the same situation with a non-refundable tax credit of $2,000.00 you will receive no tax refund. (more…)

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Child Tax Credit

Tuesday, February 14th, 2012

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

The Child Tax Credit:   Eleven Key Points

 

The Child Tax Credit is available to eligible taxpayers with qualifying children under age 17.   The IRS would like you to know these eleven facts about the child tax credit.

1.  Amount   With the Child Tax Credit, you may be able to reduce your Federal income tax by up to $1,000 for each qualifying child under age 17.

2.   Qualification   A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence.

3.   Age test   To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011.

4.   Relationship test   To claim a child for purposes of the Child Tax Credit, the child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child.   An adopted child includes a child lawfully placed with you for legal adoption.

5.   Support test   In order to claim a child for this credit, the child must not have provided more than half of his/her own support.

6.   Dependent test   You must claim the child as a dependent on your federal tax return.

7.   Joint return test    The qualifying child can not file a joint return for the year (or files it only as a claim for refund).

8.  Citizenship test   To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.

9.   Residence test   The child must have lived with you for more than half of 2011. There are some exceptions to the residence test, found in IRS Publication 972, Child Tax Credit.

10.   Limitations    The credit is limited if your modified adjusted gross income is above a certain amount.   The amount at which this phase-out begins varies by filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000.   For married taxpayers filing a separate return, it begins at $55,000.   For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax and any alternative minimum tax you owe.

11.   Additional Child Tax Credit   If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

For more information, see IRS Publication 972, available at www.IRS.gov or by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant on the IRS website to determine if you’re eligible for the Child Tax Credit. The ITA is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.

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Are You Eligible for the Earned Income Tax Credit?

Wednesday, February 1st, 2012

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

 Check your Eligibility for Earned Income Tax Credit (EITC)

The Earned Income Tax Credit is a financial boost for workers earning $49,078 or less in 2011. Four of five eligible taxpayers filed for and received their EITC last year. The IRS wants you to get what you earned also, if you are eligible.

Here are the top 10 things the IRS wants you to know about this valuable credit, which has been making the lives of working people a little easier since 1975.

1.   As your financial, marital or parental situations change from year to year, you should review the EITC eligibility rules to determine whether you qualify. Just because you didn’t qualify last year doesn’t mean you won’t this year.

2.   If you qualify, the credit could be worth up to $5,751. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on your earned income and whether or not there are qualifying children in your household. The average credit was around $2,240 last year.

3.   If you are eligible for EITC, you must file a federal income tax return and specifically claim the credit – even if you are not otherwise required to file. Remember to include Schedule EIC, Earned Income Credit when you file your Form 1040 or, if you file Form 1040A, use and retain the EIC worksheet.

4.   You do not qualify for EITC if your filing status is Married Filing Separately.

5.   You must have a valid Social Security number for yourself, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC.

6.   You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.

7.   Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet the age and residency requirements, as well as dependency rules.

8.   Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.

9.   It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on the IRS website, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.

10.   Free help is available at Volunteer Income Tax Assistance sites to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software will figure the credit for you. To find a VITA site near you, visit the IRS.gov website.

For more information about the EITC, see IRS Publication 596, Earned Income Credit. You can download this publication – available in English and Spanish – from this website or order it by calling 800-TAX-FORM (800-829-3676).

Links:

YouTube Videos:

Earned Income Tax Credit English | Spanish | ASL

 

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You Still Have Time to Qualify for the 2011 Home Energy Credit Tax Deduction

Monday, November 21st, 2011

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

Home Energy Credits Still Available for 2011
 

The IRS reminds homeowners that they still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits.

The “Nonbusiness Energy Property Credit” is aimed at homeowners installing energy efficient improvements such as insulation, new windows and furnaces. The credit is more limited than in the past years, but can still provide substantial tax savings.

• The 2011 credit rate is 10 percent of the cost of qualified energy efficiency improvements. Energy efficiency improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.

• The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel.

• The credit has a lifetime limit of $500, of which only $200 may be used for windows. If the total of nonbusiness energy property credits taken in prior years since 2005 is more than $500, the credit may not be claimed in 2011.

• Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before January 1, 2012.

Homeowners going green should also check out the “Residential Energy Efficient Property Credit“, designed to spur investment in alternative energy equipment.

• The credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.

• No cap exists on the amount of credit available except for fuel cell property.

• Generally, labor costs are included when figuring this credit. 

Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.
 
Eligible homeowners can claim both of these credits on Form 5695, Residential Energy Credits when they file their 2011 federal income tax return. Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A.

YouTube Videos:

• Cut Your Energy Costs and Taxes English  | ASL Link:

• Form 5695, Residential Energy Credits

 

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