Deductions

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Top Ten Facts About Child & Dependent Care Credit

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Did you pay someone to care for a child, spouse, or dependent last year? If so, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. Below are the top 10 things you should know about claiming a credit for child and dependent care expenses.

  1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.
  2. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

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Schedule A for itemized deductions, now Schedule L too

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Not since the direct deduction for some charitable contributions was removed has the standard deduction changed from its basic amount plus its additional amounts for the aged or blind.

In recent years, however, we've had three law changes that add to the standard deduction.

  • The American Recovery and Reinvestment Act of 2009 added sales taxes paid on the purchase of a new car to the standard deduction.

  • The Housing Act of 2008 added the property tax deduction for non-itemizers to the standard deduction.

  • The Economic Stabilization Act of 2008 added a standard deduction for net disaster losses.

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IRS eases (somewhat) rules to claim unrelated persons as dependents

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The IRS has ruled that an individual will no be treated as the qualifying child of a person if that person doesn't make enough to file a return and either does not file a return or files a return solely to obtain a complete refund of withheld income taxes. The code provides that the term "dependent" means a "qualifying child" or a "qualifying relative." Among other requirements, a qualifying relative cannot be the qualifying child of any other taxpayer.

So, to put it into an example. Jennifer supports as members of her household an unrelated friend, Rick, and Rick's four-year-old child, Lisa. Rick has no gross income and is

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The Stimulus Plan and New Car Sales

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Last month, President Obama signed the "American Recovery and Reinvestment Act of 2009" -- otherwise known as the economic stimulus act. We're like most tax professionals in that we're still sorting through the Act's nearly $300 billion in tax cuts to see which will be most valuable for you. But we can tell you that it will take careful planning to make the most of the new rules. For better or for worse, the new administration doesn't seem to be making "tax simplification" much of a priority.

Take the new deduction for sales tax on new cars. The concept is simple enough. The auto industry is a huge part of our economy. Car sales have slowed to the point where General Motors stock costs less than a gallon of gas and carmakers are flirting with bankruptcy. Why not give car buyers a tax incentive to stimulate manufacturers?