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Tax Deductions

Tax Deductible Charitable Donations

Tax Deductible Charitable Donations

By on Dec 22, 2015 in Tax Deductions | 0 comments

The holiday season is officially underway and ‘tis the season to shop, buy, and give gifts to friends and family. It is also the time of the year where people give more thought and attention to the less fortunate. Most of us are familiar with the Santa—or these days, anyone ringing a bell alongside a red Salvation Army bucket, tugging at the hearts of those who are already in the giving mood. You may also see more commercials persuading viewers to give to their charitable organization. For those generous givers, did you know that you could write off some of your financial gifts off as a tax deduction? Well, you can!  Giving in Order to Receive  It may seem odd to expect to profit off of a donation, but it is done all the time. Some organizations will even issue you a receipt for this very reason. Others might take the approach of a for-profit business and issue an official charitable organization statement to you at the end of the tax year to use for tax purposes. What Qualifies as a Charitable Contribution  Just because an organization is asking for money doesn’t mean that they are a non-profit organization. If you are donating finances to a business and expect to write it off as a tax deduction, it is recommended to research that company first to determine if it is for-profit. If so, then it is not legally considered a charitable contribution. Here is a list of the types of organizations that the IRS considers as a tax-deductible contribution:  Public schools Non-profit hospitals Religious Organizations Federal, state and local government businesses and/or anything going toward public purposes Non profit homeless shelters and food banks Veteran’s organizations Goodwill Industries Salvation Army American Red Cross  In short, as long as the organization is non-profit, it is considered a tax write-off. Most of these organizations have arranged it so that you can give online. If this is the method in which you choose to give, then be sure to save your digital receipt. You can even be eco-friendly and create a digital folder on your desktop labeled “Tax Deductible Contributions” and save all of your digital charitable receipts there.  What Does Not...

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How to Know If You Are Tax Exempt

How to Know If You Are Tax Exempt

By on Nov 5, 2015 in Tax Deductions, Tax Tips, Taxes | 0 comments

What Does it Mean to Be Tax Exempt?  Good question. Most people have gone their entire lives filing annual taxes and may have no clue what it means to be tax exempt. This is not a thing to be ashamed of as most people hand their W2s over to a tax preparer to process it and wash their hands of the whole thing! At any rate, it is important to at least have some knowledge of certain terms regarding your taxes.   Being tax exempt is something every taxpayer should wants as it reduces the taxable dollar amount that one may owe. There are many ways one can qualify for tax exemptions. Let’s take a look a few of them now:  Personal Exemption To qualify for a personal exemption, you must either be the Head of Household or make sure that no one is claiming you as a dependent. Personal exemptions are reportedly a fixed amount of $3,950, but can change at the IRS’s discretion.  Pensions, Medical, Dental, & 401K Plans  Another way to make some of your income tax exempt is by taking advantage of the benefits that your job may offer. Pensions, medical, dental and 401K Plans are all taken out of your gross income before taxes. What this means for you is that it reduces where you would rank in the tax bracket, and consequently, the amount that you have to report as gross income, reducing the overall net. For the more money one earns, the more taxes that household will have to pay. There are some discrepancies with some of these advantages. For instance, the pensions and 401K savings only delay what you owe to the IRS. Since this is money that you haven’t physically received, it is not recorded as taxable income. However, the minute those funds are dispersed in your care is the moment that the IRS considers that part of your gross income.  Charitable and/or Religious Organizations  The IRS will give tax breaks to organizations they believe are providing a service to the community. Charitable and religious organizations usually file to qualify as a 501c 3 non-profit organizations that make them exempt from paying any taxes. This is especially advantageous for those...

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What is an Earned Income Tax Credit?

What is an Earned Income Tax Credit?

By on Oct 22, 2015 in IRS, Tax Deductions, Tax Tips | 0 comments

There are many taxpayers who file their own taxes. Yet, they may have no idea how to answer some of the questions asked, no matter how user-friendly a tax software may be. Most of the confusion may come from simply not knowing or understanding the general terms. One important one is Earned Income Tax Credit (EITC or EIC). Because some may not know what it means, they often will answer ‘no’ on their taxes just to be on the safe side. Actually, qualifying for EIC is not a bad thing. In fact, it may help you receive more money on your annual taxes. According to the Internal Revenue Service (IRS), an EIC is a credit for taxpayers whose annual income ranges from low to moderate. It is designed to give those who don’t make a lot of money a tax break.  Who Can Qualify?  You or your spouse might be able to qualify only if you file jointly. If you and your spouse file married filing separately, this will forfeit you from being able to claim EIC. Additionally, you and your spouse must have a valid social security number. Of course, you must be a United States citizen and no one can claim you as a dependent. Furthermore, you must meet at least one of the following criteria:  EIC qualifiers must have a qualifying dependent. EIC qualifiers have to be between the ages of 25-65 at the end of that respected tax year. EIC qualifiers must have lived in the United States for more than half of the year . Why is There an Age Limit?  The ages 25 and 65 are significant because for the IRS, it marks the beginning and ending of financial independence. The age 25 marks the age limit where a parent can no longer claim a child and 65 marks the average age most taxpayers retire and begin collecting their social security. It makes all the difference determining whether someone can officially claim you as an independent verses you claiming him or her! Of course, certain stipulations apply for every case, depending on each household’s situation.  So This Only Applies to People with Children?  Not necessarily. Tax filers who don’t have any children might be...

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Who Does the IRS Consider a Dependent?

Who Does the IRS Consider a Dependent?

By on Aug 29, 2015 in Tax Deductions | 0 comments

Who you claim as a dependent on your tax return can have a huge impact on your tax savings.  Every dependent that you claim on your return can save you up to $3950 on your taxes. That’s a significant amount of money in your pocket and can make the difference between paying the IRS or receiving a refund from them! So, before the tax year ends, it may helpful to re-evaluate whether anyone in your family might qualify as a dependent. Here is a summary of the current guidelines that the IRS follows that may help you decide: There are two types of dependents: A qualifying child:  A qualifying child must be under age 19 or age 24 if they are a full time student. They must live with you for more than 6 months out of the year and if they have a job, the income cannot exceed ½ of what it costs to support them. Only one person can claim the child and the child can be a son, daughter, stepchild, foster child, sibling, adopted child, or offspring. There is no age limit if your child is disabled. A qualifying relative:  You can claim a qualifying relative as a dependent on your tax return if they make less than $3950/year and live with you all year (or you have completed Publication 501 indicating that they do not live with you.)  You must also provide more than ½ of their financial support throughout the year and be the only person claiming them as a dependent on your return. All dependents must meet the following criteria in order to be claimed by anyone They must be a legal US citizen, US national, a US resident or, a resident of Mexico or Canada. They cannot be filing a joint return for themselves. So, if you provide significant support for a child or parent but they file a joint return with their spouse, they are NOT eligible to be claimed as a dependent. You cannot claim someone as a dependent who takes a personal exemption for themselves or claims a dependent on their tax return. Success Tax Relief:  Can Help You Make Sense of the Process You may still have questions...

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Tax Deductions on Mortgage Payments

Tax Deductions on Mortgage Payments

By on Aug 13, 2015 in Tax Deductions | 0 comments

Buying a house is a sound financial decision all around.  You’re investing in your future and with interest rates at an all time low, now is a great time to go from renting to home ownership.  You may be unaware that one of the biggest benefits of buying a house is that in most cases a portion of your mortgage payment each month is tax deductible. Here is How it Works In most cases, the interest that you pay on your mortgage loan is entirely tax deductible.  You pay more interest earlier on in the loan so you can count on this to help offset any tax liability. In order to claim this deduction, you must itemize your deductions on your tax return.  You should receive a notice from your lender so that you know exactly how much to deduct. Your mortgage loan must be secured by your home and the money from the loan has to only have been used to purchase the home or materials to build or improve the primary residence (plus up to one additional home that is used for personal purposes) If you took out the loan after October 14, 1987, you can only deduct the interest on the first $1 million of mortgage loans.  If you have two homes, these limits are cumulative so you can still only deduct interest on the first $1 million. If you have a rental property that you have a mortgage loan on, you can only deduct the interest if you use it as your residence for more than 15 days each year or more than 10% of the days that you rent out the property.  Otherwise, you cannot deduct the mortgage interest for your rental property. Mortgage points are also deductible in the year that you close on your home.  Sometimes, instead of deducting them that year, you can deduct them over the course of the loan. Property Taxes can also be deducted on your annual tax return.  Over the course of the year, a portion of your payment goes into an “escrow” account.  Money is held there to pay for things like homeowners insurance and property taxes.  You can find out the amount that you paid...

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Tax Deductions on Work Related Expenses

Tax Deductions on Work Related Expenses

By on Aug 11, 2015 in Tax Deductions | 0 comments

Taxes are a part of life in the U.S. and if you have a job that earns income, you are responsible for paying the IRS each year.  You may already know about some of the potential employment-related tax deductions available for those who are self-employed, but did you know that you might also be able to deduct expenses if you work for an employer and go to an office every day? We have pulled together some information to help you maximize your deductions on work related expenses this year: 1. Automobile Costs You are allowed to deduct auto costs for travelling from one office to another, or to and from a business meeting (from your office not your home).  You need to keep track of these expenses from one office to another as well as expenses related to a business trip. If you use your personal vehicle for business related purposes, you can either deduct the cost of the mileage (using the standard rate for the year) or the actual vehicle expenses for the year. You should note that if you lease a vehicle, you must choose which deduction to take (mileage vs. vehicle expenses) and use that for the entirety of the lease. Keep in mind, however, that there are also travel-related expenses you cannot deduct.  These include expenses for driving/commuting to and from home to your primary office, parking and tolls or fees related to getting yourself from home to work.  These are considered personal expenses. 2. Business Travel Business travel is another big area for employee deductions.  You are able to deduct the cost of food, baggage, transportation costs, tips, etc.  You can even deduct the cost of your passport!  The only stipulation here is that you were on the trip for less than 1 year.  The IRS website has specifics about what portion of these items are deductible. 3. Expenses Related to a Job Search You may be surprised to learn that many expenses related to a job search are deductible.  This includes travel (to and from the interview), the cost of printing materials for interviews, resume, and more.  You can deduct these costs even if you do not get a new job. 4. Home...

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