Blog

Ways to Save More Money

Author: Keith Huggett

I was thinking the other day about my son.  He's only two years away from starting his college education. WOW!  College expenses today are out of this world, I cringe at the thought of where they will be two years from now.  If you are a student, trying to scrape up enough money for tuition, books, and occassionally food, I have a few tips for you.

At tax time there are a few ways to save more money:

1. The American Opportunity Tax Credit or Lifetime Learning Credit may be available to you depending upon your income.  If you are one of those whose parents pay for your college education, your parents may be able to claim these credits if you are still their dependent. The IRS allows that if you are a qualified student, you can claim the maximum credit of $2500 for the first four years of your college education.  The Lifetime Learning Credit is for qualified tuition and related expenses paid for eligible students, up to $2000 per tax return.

2.Tuition and fees can also be deducted. You can can reduce the amount of your income subject to tax by up to $4,000. That equals out to maybe 1 semester's book cost.

3. Scholarships are another way to save money. If you receive a scholarship and are a qualified degree candidate, the money you receive is tax free.  However, it must be used for tuition, fees, books, supplies and equipment, otherwise anything else you use it for becomes taxable.

4. Student loans. Sounds scary right? Going into debt at the beginning of your life.  Up to $2500 of the interest you pay on student loans is tax deductible depending upon your income.

5. Work related education can save you some money also.  If you are back in school to learn something new related to your work, you may be able to deduct the amount spent on education expenses.

There are other ways available to you to keep more money in your wallet.  These usually fall under the topic of modifying your behavior.  Buy a coffee machine instead of hitting the local Starbucks.  Buy used books and electronics - they cost less than brand new versions and are often easily available. Plan your meals wisely, not everyone can afford to spend oodles on snacks at the snackbar.  Using common sense can keep more dollars in your pocket to be spent on other things of importance.

If you have any questions about education involved tax deductions, please contact us. The Tax Office, Inc. has many specialized tax professionals who can help you.

Your Government at Work

Author: Keith Huggett

Well, it's the end of 2014 and our government has decided favorably on extending certain tax breaks for this year.  In a manner similar to the American Taxpayer Relief Act of 2012,  Congress and President Obama have passed Tax Increase Prevention Act of 2014  to extend several tax credits through the end of December 2014.  So what does this mean for you and your business?

For Individuals:

• The ability to make qualified charitable gifts directly from an IRA and exclude the IRA withdrawal from income.You must be at least 70½ years old at the time of the gift, the gift must go directly to the charity from the IRA trustee, the gift counts towards your Required Minimum Distribution for the year of the gift and the maximum gift allowed is $100,000 per year.  

• You can deduct state and local sales taxes rather than state and local income taxes.  This provision is particularly important for those taxpayers living in the seven states that don’t currently assess an income tax.

• Teachers can deduct up to $250 in unreimbursed classroom expenses.

  Individuals can claim an above-the-line deduction for tuition and fees for qualified higher education expenses.

• The above-the-line deduction for couples with a modified AGI of $130,ooo or less and  $2,000 for couples between $130,000 and $160,000.  For single taxpayers, the breakpoints are $65,000 and $80,000.  

• Qualified Mortgage Debt- up to $2 million dollars (married filing jointly) or $1 million for married filing separately, can be excluded from income.

For businesses:

• You can claim credits for expenses related to research & development activities, for providing low-income housing structures and for businesses that employ active duty service members.

• If you have hired certain members of targeted groups, you can claim the Work Opportunity tax credit, which is equal to 40% of a portion of the first-year wages paid.

• If you purchased any qualified assets, the accelerated depreciation deduction, allows your companies to deduct 50% of the cost of a qualified asset in the year it is acquired.

• The exclusion of 100% of the gain on qualified small business stock is extended to include stock acquired in 2014 and held for more than five years.  This exclusion is scheduled to revert to 50% for qualified stock acquired after 2014.

What Deciscion will Congress Make?

Author: Jenny Shilling

At the end of 2013 many tax breaks expired. It is now up to Congress to decide which ones, if any, they are going to modify, extend, retroactively extend, or if they are going to leave things alone.  While most people think businesses are the most impacted, changes in the tax code can also affect the individual taxpayer. Here are some of the most popular tax breaks for individual taxpayers that expired in 2013:

Deducting State & Local Taxes - In 2013 you had the option of claiming an itemized deduction for general state and local sales tax instead of claiming an itemized deduction for state and local income taxes.

IRA Charitable Donations -  If you reached age 70 1/2 by the end of December, 2013 you had the ability to make donation sof up to $100,000 directly out of your IRA.  These donations counted as your required minimum distributions for your IRA.

Forgiven Principal Residence Mortgage Debt - Normally cancelled debts count as taxable cancellation of debt income. A temporary provision allowed up to $2 million of canceled debt income frim principal residence acquisition debt that was cancelled between 2000 and 2013 to be treated as a tax free item.

Energy Efficient Home Improvements - In 2013 you were able to claim a credit of up to $500 for very specific energy saving improvements made to your primary home.

Higher Education Tuition - In 2013 you could deduct up to $4000 dependent upon your tax bracket, for qualifying higher education tuition and related fees.

It is possible that these expired federal provision will be retroactively reinstated. However, there is no way of knowing what decision will be made by Congress. The tax planning specialists at The Tax Office, Inc., are closely monitoring the situation and will advise you once Congress makes a decision. Contact us today should you have any questions.

Important Considerations Before You File Your Taxes

Author: Keith Huggett

The IRS grants ministers and other clergy a number of tax deductions. While many of them are also available to the laity, a few are specific to a minister's practice, with others of general application but particularly noteworthy for the clergy. Here are the top seven:

1. Parsonage: The parsonage deduction allows clergy members to earn a "housing allowance" that is not subject to any taxes. This can apply to free rent in a church- or synagogue-owned home, or to a cash allowance that you can use for a mortgage payment or rent on your own residence.
2. Charitable donations: If you itemize on Schedule A, you can deduct your charitable donations, including your tithes.
3. Ministry-related travel expenses: As long as these expenses exceed 2 percent of your adjusted-gross income along with other work-related expenses, ministry-related travel expenses are tax deductible if they are not already paid for by the church.
4. Home office expenses: If you maintain a home office either to supplement your office at the church building, or if you work out of your home, you may be eligible to deduct a number of the expenses that you incur in maintaining that work space.
5. IRA and 403(b) contributions: You can exclude the money that you set aside for retirement from liability for taxes.
6. Student loan interest: If you are still paying off your time at the seminary, the IRS will allow you to write off up to $2,500 of interest per year as long as your income is below their limits.
7. SE tax exclusion: If you are self-employed and a member of a religious organization that has a faith-based objection to public insurance, you can opt out of Social Security and Medicare systems as well as opt out of having to pay self-employment tax by filing IRS Form 4361.

Tax Implications from this Life Changing Purchase...

Author: Jenny Shilling

Tired of paying rent to someone else and getting nothing in return? Getting ready to make that first home purchase? Buying a home, whether it's your first or fifth, will have an impact on your taxes. Luckily there are several tax deductions available when you make that purchase.

• Mortgage Interest
  When you pay rent for a house or an apartment you are helping someone else make their mortgage payment. When you make your own mortgage payment the IRS allows you to deduct the interest included in your monthly payment. At the beginning of your loan period the amount of interest you pay is at its highest level. Claiming the mortgage interest deduction may result in a larger tax refund for you at the beginning of your loan period.
  
  To make this claim you will need to itemize your deductions. You will not be able to use the standard deduction for your return.  You will receive a form 1098 at the end of the year from your loan provider detailing the amount of interest you have paid throughout the year.
• Property Taxes
  Most times your property taxes have been included in your monthly billing. The amount of property tax paid can also be deducted as part of your itemized deductions
• Home Office Deduction
  If you plan on using a portion of your home as a home office you may be able to make some additional deductions. Eligible deductions for a home office include utilities, home repairs, and internet expenses.  You must use your "office" exclusively for work to qualify for any home office deductions.