Tax Planning

, , ,

Top Ten Facts About Child & Dependent Care Credit

, , ,

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.

, ,

Schedule A for itemized deductions, now Schedule L too

, ,

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.

,

How to get your home office deduction

,

Have you wondered whether or not you’re entitled to a home office deduction? With tax time here again maybe you should take another look.

A few years back, more liberal rules came into play for home office deductions, allowing more people to qualify for the write-off. Specifically, the old, hard-to-meet “principal place of business” bar was lowered to a much more taxpayer-friendly level.

If you use your home office space regularly and exclusively for your sole proprietorship, LLC or partnership business, there are several ways to qualify for the deduction:

, ,

New rules for divorced parents & depedent deductions

, ,

The IRS issued in 2007 regulations addressing various issues pertaining to divorced parents and who can claim the dependent exemptions. These new rules take affect for most divorced parents with the filing of your 2009 income tax return.

Beginning for years beginning after July 2, 2008 (so 2009 for calendar year individual taxpayers) the IRS will no longer accept a divorce decree in lieu of Form 8332, Release of Claim to Exemption fro Child of Divorced or Separated Parents, even if the decree contains all of the information otherwise found on the Form 8332 and is not conditional in any respect (for example, conditioned on child support payments being current, etc.).

, , ,

Watch out for taxes if you sell your life insurance contract

, , ,

The IRS has issued two new rulings addressing the sale and surrender of life insurance contracts from the point of view of policyholders and the investors. In this down economy, it can make good economic sense to sell an insurance policy that is no longer needed, or maybe can no longer be afforded.

The sale of an insurance policy is the sale of an asset; however, the gain could be either ordinary income (taxed like wages) or capital gain income (generally a lower tax rate). You will also need to take into account your investment in the policy (your tax basis).

Now, this discussion does not pertain to someone selling their insurance policy when they are either chronically ill or terminally ill. In those circumstances special exclusions generally will apply.

There are three situations under which you may be selling your policy.

  1. Surrender of the policy to the issuer for cash value.
  2. Sale of the policy with cash surrender value to an unrelated person.
  3. Sale of the policy with no cash surrender value to an unrelated person.

Here are the examples for each situation which demonstrate how the tax bite is determined.

, , ,

New deduction for sales taxes on a new car purchase

, , ,

The American Recovery and Reinvestment Act of 2009 provides that for vehicles purchased on or after February 17, 2009 and before January 1, 2010 you can deduct, as an itemized deduction or as an addition to the standard deduction, sales taxes on the purchase of a qualifying new vehicle -- on the first $49,500 of the purchase price. Qualifying vehicles include the following.

  • A passenger car, light truck, or motorcycle the gross vehicle weight rating of which is not more than 8,500 pounds.
  • A motorhome.