Category: Tax Deductions and Credits | Blog

oday-26Learn about tax deductions and credits you qualify for with our blog posts. Explore different deductions you can claim based on your occupation and credits you are entitled to. If you have questions about your tax situation, our team is here to help! Always keep documentation of the expenses you are not reimbursed for because you may be audited. However, you can report tax deductions up to $300 without even having a receipt.

Questions about tax deductions or credits? Leave us a comment or give us a call Monday-Friday!

Archive for the ‘Tax Deductions and Credits | Blog’ Category

How to Qualify for the Additional Child Tax Credit

Posted by Michelle O'Brien on February 1, 2017
Last modified: February 1, 2017

Feel like the coach of a small football team? The IRS gets it!

Whether you have just one on the way or five and counting, kids are expensive. That’s why you should take advantage of tax cuts whenever possible. In addition to claiming them as dependents, you may also qualify for some other credits. One that could end up benefiting you substantially is the Additional Child Tax Credit. Let’s see if this one is for you!

What is the Additional Child Tax Credit (VS. the Child Tax Credit)?

You’ve probably heard of the Child Tax Credit. I’ll sum it up for those of you who don’t (but also check out our other article which goes into more detail, “How to Claim the Child Tax Credit”). Basically, it is a credit that can reduce your tax liability up to $1,000 per qualifying child listed on your tax return. This credit is NON-refundable, meaning that it will reduce your tax liability to $0 but will never overflow into a refund for you.

Now that we’ve covered the Child Tax Credit, you’re probably wondering what the Additional Child Tax Credit is all about, right? This is the refundable credit that will fork over the difference that you weren’t able to claim from the Child Tax Credit.   

Let’s take a look at an example:

Cindy and Lou have three qualifying kids listed on their joint tax return. Their tax liability is $2,500. After applying their Child Tax Credit at $1,000 per child, they were able to get their tax liability down to $0. They then figured out that they qualified for the Additional Child Tax Credit. Cindy and Lou were able to claim that additional $500 as a tax refund!

Here’s the math:  $2,500 IRS tax liability – $3,000 total Child Tax Credit for three kids = – $500 (more…)

Claiming Parents as Dependents If They Receive Social Security Benefits

Posted by Michelle O'Brien on December 19, 2016
Last modified: January 25, 2017

It’s been said that life comes full circle. Well, so do taxes.

It’s difficult to watch your parents grow old. The ones who supported you while growing up are now the ones you’re taking care of. You may be curious if you can claim your parents as dependents on your tax return like they once did for you.

The answer lies in the following five tests set up by the IRS:

#1. They must be related to you.

#2. They must be a citizen or resident of the United States, Canada, or Mexico.

#3. They must not be filing a joint tax return.

#4. They must have an annual gross income of less than $4,000.

#5. You must provide more than 50% of their financial support for the year.

With these qualifications in mind, let’s take a look at some special circumstances that might apply to you and your parents. (more…)

How to Claim the Child Tax Credit

Posted by Michelle O'Brien on October 27, 2016
Last modified: October 28, 2016

Parents deserve a bit of a (tax) break now and then.

As a busy parent, filing taxes can be found on the To-Do list between Monday’s soccer practice and Thursday’s parent-teacher conference. Do yourself a favor this year and see if you are eligible for the Child Tax Credit. Tax credits are great because, unlike deductions, they reduce your tax bill dollar-for-dollar. That means, a larger tax refund for you and your family!

What is the Child Tax Credit?

The Child Tax Credit offers a credit of up to $1,000 per child to qualifying taxpayers. It is only available to those who can claim a child as a dependent and meet several other requirements.

There is no limit to the number of children you can claim using the Child Tax Credit, however, claiming lots of kids may subject you to the Alternative Minimum Tax (AMT).

Who can claim the Child Tax Credit?

In order to claim the Child Tax Credit, the child in question must: (more…)

Holiday Tax Deductions: Business Gifts

Posted by Michelle O'Brien on December 21, 2015
Last modified: October 6, 2016

Tis the season of Secret Santas and Holiday Company Parties.

It’s a common tradition among businesses to get in the holiday spirit and give gifts to clients and employees. Even though giving gifts doesn’t typically put the idea of taxes in mind, it’s important to know how to report business gifts as tax deductions.

What are direct gifts versus indirect gifts?

The IRS will give the green light on a tax deduction for two types of gifts; direct and indirect. Don’t worry – this still gives you substantial leeway to choose that perfect gift this year. Direct gifts are given as part of a direct professional relationship. For example, the owner of 123, LLC gifts a Godiva gift basket to each employee for the holidays. Indirect gifts typically involve a middleman, such as sending a gift home for your employee’s child.

Is there a cost limit?

There is a $25 limit per gift, per year. What’s that mean? Well, let’s say that your company likes to give gifts to clients or employees multiple times per year. The deduction would only apply to ONE gift and only $25 of that gift could be deducted.

Keep in mind that the gift CAN cost more but only $25 of the total can be reported as a deduction (so hold onto that ‘#1 BOSS’ title and keep giving your employees those iPad minis).  

Does the cost include incidentals?

(more…)

Holiday Tax Deductions: Gifts to Charity

Posted by Michelle O'Brien on December 1, 2015
Last modified: October 6, 2016

It’s almost time to bust out the wrapping paper and tinsel!

Yes, it’s that time of year again. It’s the season of giving. Before you get wrapped up in holiday parties and stocking stuffers, you’ll want to make sure that you’re mind isn’t blurred with visions of sugarplums and too much eggnog.

January marks the start of tax season and we want to make sure that you’re ready. That includes reporting those holiday gifts to charity as tax deductions.

How do I donate?

We tend to think that the only way we can help out in society is by breaking out our checkbooks and tacking on as many zeros as our bank accounts will allow. Money is great. But it’s not the only way. It’s also probably the main reason why the majority of us end up doing nothing. We simply can’t afford to.

Seeing as our daily lives revolve around checking up on ourselves (our bank accounts, our smartphone notifications, our Tinder profiles), it’s easy to forget that taking the time out for others is also considered a charitable donation.

If you can write out a check, then all the more power to you! If you can’t, don’t downgrade the time you can spend helping out at your local soup kitchen or cleaning out your closet to donate those jeans and blazers you never ended up wearing. Your nearest Goodwill or Salvation Army will take them off your hands.

Where should I donate?

The dilemma for some of us is that we don’t know where our hard earned dollars are going when we donate to a charity. We understand! Who wants to spend time researching a reputable charity to support and then not be certain that they are using your money the right way? (more…)

Earned Income Tax Credit Tips for Married Filers

Posted by Michelle O'Brien on March 27, 2015
Last modified: October 6, 2016

First comes love, then comes marriage, then comes a baby… and the Earned Income Tax Credit?

Here’s one for the next round of Jeopardy: the Earned Income Tax Credit or EITC was designed to offset the burden of Social Security taxes paid by low to middle income working families.

And here’s one you can take to bank: if you find yourself struggling to provide for your family you may qualify for the EITC and increase your refund at tax time .

Whether you qualify, not to mention the amount of the credit you’ll receive, depends on your income and how many qualifying children you’re supporting.

Eligibility is based on your income and your filing status

First, in order to qualify, you must file your tax return as married filing jointly. Your filing status can not be filing separately.

Second, your income earned (that is, the wages you received from your job or the net profits you made from self employment), can not exceed a certain threshold.

If you’re married filing jointly, your 2014 adjusted gross income, must be less than:

  • $52,427: 3 or more qualifying children
  • $49,186: 2 qualifying children
  • $43,941: 1 qualifying child
  • $20,020: no qualifying children (more…)

Earned Income Tax Credit Tips for Single & Head of Household Filers

Posted by Michelle O'Brien on March 26, 2015
Last modified: October 6, 2016

The Earned Income Tax Credit can add a total of up to $6,044 to your tax refund!

Being a single parent is no picnic. Parenthood is a tough gig, especially when you’re on your own.

Raising a family on one source of income is enough of a headache. On top of that, you have dinner to cook, homework to help with, and sports games to attend. It’s clear, you have a lot on your plate and could use more money in your pocket.

Here’s something you must know: to lessen the financial burden of being a single parent, the IRS offers the Earned Income Tax Credit to qualifying tax filers.

Why Your Income Matters

The EITC or EIC is a refundable tax credit that is only offered to taxpayers who earn low-to-moderate income from their job or from being self-employed. That means if you don’t work, you cannot claim the credit.

In addition, once your income goes over a certain threshold, you won’t qualify to receive the tax credit. (more…)

Tax Deductions for Landlords (Part 3)

Posted by Michelle O'Brien on March 25, 2015
Last modified: October 6, 2016

Landlords can also deduct rental property depreciation…

In part 1 and part 2 of this article, we explained that the services and expenses that you paid for could be included as deductions on your tax return.

In addition to these expenses, you can deduct the depreciation of your rental property.

In other words, you can deduct the “wear and tear” costs of the rental property, including any improvements.

Confused? No worries! Keep reading and we’ll get to the bottom of what depreciation means, and explain what types of improvements you can include on your tax return.

What Does “Depreciation” Mean?

For tax purposes, you can deduct the cost of your property along with any improvements you made to it, in the form of depreciation.

Think of depreciation as a way to recover the costs associated with your rental property.

You won’t deduct the cost of buying or improving your rental property as one large tax deduction. Instead, you’ll spread the costs across the “life” of the property.

The amount you can depreciate is dependent on a variety of factors, such as how long the property (or improvement) will last and what it is. To learn more, visit IRS Publication 527, Residential Rental Property. 

What Qualifies?

Owning a piece of property does not automatically qualify you to deduct it’s depreciation value. To deduct the depreciation of a rental property, the IRS requires that you also meet the following criteria:

  • The property produces income (in other words, you rent it out).
  • The property has a “useful life”, meaning it will eventually wear out, get used up, etc. (For example, a house has a useful life while an unused piece of land you own does not.)
  • The useful life of the property is longer than one year. (more…)

Tax Deductions for Landlords (Part 2)

Posted by Michelle O'Brien on March 20, 2015
Last modified: October 6, 2016

More landlord tax deductions

As a landlord, you know first hand how fast the “little things” really add up.

Filling up the gas tank after traveling to pick up rent checks, fixing a broken window, and replacing a lock  are just a few examples of expenses that total up over time.

The good news it that each of the expenses just mentioned is in fact tax deductible. Yes, even your vehicle mileage.

In part 1 of this article, we explained that the services you paid for could be included as deductible rental expenses. There are other landlord tax deductions you’ll want to include on your tax return.

What other rental expenses can I include as a deduction?

If you earned rental income, as we mentioned, you can deduct the expenses that you paid in relation to:

  • upkeeping & maintaining a rental property
  • conserving & managing a rental property (more…)

Tax Deductions for Landlords (Part 1)

Posted by Michelle O'Brien on March 20, 2015
Last modified: October 6, 2016

There are quite a few, often-overlooked expenses that landlords can report as a tax deduction.

If you own rental real estate, you must report the income you earned from this property on your federal tax return. You will also be required to pay tax on your rental income if you made a profit.

First, keep in mind that aside from the monthly payments you receive from your tenants, taxable rental income also includes:

  • advance rent payments
  • security deposits used as a final payment of rent
  • payments for canceling of a lease
  • property or services received in place of money, as rent

So, what’s considered a “rental expense”?

On the plus side, rental properties offer more tax benefits than most investments. In fact, you can deduct a majority of the rental expenses you had during the year. According to the IRS, you can report expenses related to the following:

  1. upkeep & maintenance of the property
  2. conservation & management of the property

Landlord tax deductions also include contract work!

Remember when you forked over thousands to a plumber after your tenant called complaining that the toilet wasn’t flushing?  How about that week the roof collapsed from snowfall and you were forced to track down a roofer?

These (often unexpected) headaches come along with life as a landlord. Fortunately, they are related to the upkeep and maintenance of the property and thus, tax deductible expenses. (more…)