taxpreparation-weblog

Tax Benefits for Taking Higher Education Classes

Filed in archive Information About on June 3, 2010

Tax Benefits for Taking Higher Education Classes
© portorikan
When families are paying for higher education for one of the qualified family members, it may provide them with a tax break. These tax benefits apply to people who are currently saving money for, are paying for it now, or are in the process of repaying a college loan.

For those with a qualified family member, that is you, a spouse, or a dependent, there are three possible ways to take advantage of these tax incentives. Each one of them is different and has different rules.

The Hope and Lifetime Learning Credit are two different credits and provide tax breaks for tuition and other expenses related to education. Only one of them can be claimed in a single year.

It is also possible to deduct the cost of tuition, up to $4,000 per year. This is more limited, and those who are married and file separately cannot claim it.

Other income tax incentives goes to those who are paying back a student loan. They are able to deduct the interest from it, or they can also have it not counted as income if the loan was canceled.

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How Does A Foreclosure Affect My Taxes?

Filed in archive Information About on May 28, 2010

How Does A Foreclosure Affect My Taxes?
© pnwra
If you have lost your home due to foreclosure, you may be able to qualify in such a way that no taxes will be owed on that debt forgiveness. The Mortgage Debt Relief Act of 2007 lets homeowners who lost their principal residence through foreclosure not have to pay taxes on the forgiven debt amount. The Act applies to homes that had debt forgiven from 2007 up through the year 2012.

The Act requires that it must be a principal residence and not a second home or a vacation home. It also is limited up to $2 million of forgiven debt for a couple, and up to $1 million if filing separately. If you went through a restructuring of your mortgage on your principal residence, this will also qualify.

This only applies to forgiven debt on your residence. That means that if you have other debt that was forgiven, such as for a car, then you will be required to file that debt forgiveness on your income taxes. The IRS says that most likely, the lender filed a 1099-C on the canceled debt, and you will be required to pay taxes on other forms of forgiven debt.

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Taxes and Job Loss

Filed in archive Information About on May 27, 2010

Taxes and Job Loss
© SOCIALisBETTER
When it comes to what things have to be reported on your income taxes, losing your job changes some things that you need to be aware of. New income that you may receive, such as severance pay or unemployment compensation, will have to be reported - they are taxable. The IRS recommends that you set money aside from it for taxes. Money that you received for accumulated vacation days or sick days are taxable, too.

Expenses that you get in order to find a new job could be tax deductible. So, before you start looking around, make sure that you familiarize yourself with the possible deductions and then keep good records. This should include things like travel expenses to and from interviews, contacts, fees for resume preparation, any agency fees, and more.

There may also be tax deductible expenses if you should have to move in order to get a new job. Some qualifications will apply so be sure to learn more about them from IRS Publication 521.

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Get Reduced COBRA Health Insurance Coverage if You Have Lost a Job or Had Reduced Hours

Filed in archive Information About on May 22, 2010

Get Reduced COBRA Health Insurance Coverage if You Have Lost a Job or Had Reduced Hours
© Corey T. Burns
When the Recovery Act was passed, it made provisions for those who had lost their jobs to be able to get a subsidy, or a tax credit for COBRA health insurance. Because COBRA health insurance can be so expensive, the government decided to give a break to those who needed it.

In order to qualify for these tax benefits, you will need to have received less hours or been laid off between September 1, 2008 and May 31, 2010. The Recovery Act enables eligible workers to get a reduction of 65 percent, leaving them to only pay 35 percent.

There is also an even larger benefit that some may be eligible to receive. Some may get up to 80 percent of the cost of their COBRA coverage from the Health Coverage Tax Credit (HCTC). This tax credit provides for those who receive Trade Adjustment Assistance benefits, or are between the ages of 55 and 65 and are already getting pension benefits from the Pension Benefit Guaranty Corporation. They also have to be in a qualified health insurance plan to get the benefits.

Individuals who also experienced a cut in their work hours, and at first chose to get the COBRA benefits and then dropped them later are also eligible to get the benefits. Others who chose not to take them at all have a second chance at this greatly reduced rate. There are some limitations on time of eligibility for this benefit, so you may want to act quickly. The IRS Website has more details.

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What Tax Records Should You Keep for Tax Purposes?

Filed in archive Information About on May 13, 2010

What Tax Records Should You Keep for Tax Purposes?
© Valerie Everett
After you file your taxes for the year, you do not want to be so hasty as to throw away your tax records. Because there is a possibility that the IRS may want to look over your claims and records, there are certain tax records to keep for three years.

Tax records that the IRS is most likely to want to look at include receipts, checks - canceled, images of, or substitute, mileage logs, proofs of payment, and other evidences that relate to any credits or deductions you may have claimed on your tax return.

The IRS says on its Website, that it may also want to see any documents that deal with buying or selling a home, stock transactions, and IRA's. It will also ask to see any tax records dealing with rental properties and businesses you have.

The Internal Revenue Service does not have any particular recommendation about what form these tax records are to be in or how they should be organized. The main idea is that if they want to see them, you want to be able to put your hands on them quickly, in order to resolve any difficulties.

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