Author: Leon Clinton

Are you planning to pay for college in 2015? If so, there are two education credits that can help you with the cost of higher education. Taking advantage of these education tax credits can mean tax savings on your federal tax return by reducing the amount of tax you owe. Here are some important facts you should know about education tax credits.

American Opportunity Tax Credit:

• You may be able to claim up to $2,500 per eligible student.
• The credit applies to the first four years at an eligible college or vocational school.
• It reduces the amount of tax you owe. If the credit reduces your tax to less than zero, you may receive up to $1,000 as a refund.
• It is available for students earning a degree or other recognized credential.
• The credit applies to students going to school at least half-time for at least one academic period that started during the tax year.
• Costs that apply to the credit include the cost of tuition, books and required fees and supplies.

Lifetime Learning Credit:

• The credit is limited to $2,000 per tax return, per year.
• The credit applies to all years of higher education. This includes classes for learning or improving job skills.
• The credit is limited to the amount of your taxes.
• Costs that apply to the credit include the cost of tuition, required fees, books, supplies and equipment that you must buy from the school.

For both credits:

• The credits apply to an eligible student. Eligible students include you, your spouse or a dependent that you list on your tax return.
• You must file Form 1040A or Form 1040 and complete Form 8863, Education Credits, to claim these credits on your tax return.
• Your school should give you a Form 1098-T, Tuition Statement, showing expenses for the year. This form contains helpful information needed to complete Form 8863. The amounts shown in Boxes 1 and 2 of the form may be different than what you actually paid. For example, the form may not include the cost of books that qualify for the credit.
• You can’t claim either credit if someone else claims you as a dependent.
• You can’t claim both credits for the same student or for the same expense, in the same year.
• The credits are subject to income limits that could reduce the amount you can claim on your return.
• Use the Interactive Tax Assistant tool at IRS.gov to see if you’re eligible to claim these education tax credits.

If you can’t claim either of these tax credits, please call the office to see if there are other education-related tax benefits that you might be able to claim.

• By Leon Clinton
• June 26, 2015

If you, your spouse or dependents had significant medical or dental costs in 2015, you may be able to deduct those expenses when you file your tax return. Here are eight things you should know about medical and dental expenses and other benefits.

1. You must itemize. You can only claim medical expenses that you paid for in 2015, and only if you itemize on Schedule A on Form 1040. If you take the standard deduction, you can’t claim these expenses.

2. Deduction is limited. You can deduct all the qualified medical costs that you paid for during the year. However, you can only deduct the amount that is more than 10 percent of your adjusted gross income. The AGI threshold is still 7.5 percent of your AGI if you or your spouse is age 65 or older. This exception will apply through December 31, 2016.

3. Expenses must have been paid in 2015. You can include medical and dental expenses you paid during the year, regardless of when the services were provided. Be sure to save your receipts and keep good records to substantiate your expenses.

4. You can’t deduct reimbursed expenses. Your total medical expenses for the year must be reduced by any reimbursement. Costs reimbursed by insurance or other sources do not qualify for a deduction. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.

5. Whose expenses qualify. You may include qualified medical expenses you pay for yourself, your spouse and your dependents. Some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement, or those with a qualifying relative who is not your child.

6. Types of expenses that qualify. You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or treatment affecting any structure or function of the body. For drugs, you can only deduct prescription medication and insulin. You can also include premiums for medical, dental and certain long-term care insurance in your expenses. And, you can also include lactation supplies.

7. Transportation costs may qualify. You may deduct transportation costs primarily for and essential to medical care that qualifies as a medical expense, including fares for a taxi, bus, train, plane or ambulance as well as tolls and parking fees. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses, which is 23 cents per mile for 2015.

8. No double benefit. You can’t claim a tax deduction for medical and dental expenses you paid for with funds from your Health Savings Accounts (HAS) or Flexible Spending Arrangements (FSA). Amounts paid with funds from those plans are usually tax-free. This rule prevents two tax benefits for the same expense.

Please call if you need help figuring out what qualifies as a medical or dental expense.

• By Leon Clinton
• June 23, 2015

If you have enrolled for health coverage through the Health Insurance Marketplace and receive advance payments of the premium tax credit in 2015, it is important that you report changes in circumstances, such as changes in your income or family size, to your Marketplace.

Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Marketplace. Having at least some of your credit paid in advance directly to your insurance company will reduce the out-of-pocket cost of the health insurance premiums you’ll pay each month.

However, it is important to notify the Marketplace about changes in circumstances to allow the Marketplace to adjust your advance payment amount. This adjustment will decrease the likelihood of a significant difference between your advance credit payments and your actual premium tax credit. Changes in circumstances that you should report to the Marketplace include, but are not limited to:

• An increase or decrease in your income
• Marriage or divorce
• The birth or adoption of a child
• Starting a job with health insurance
• Gaining or losing your eligibility for other health care coverage
• Changing your residence

For the full list of changes you should report, visit HealthCare.gov or call the office. If you report changes in your income or family size to the Marketplace when they happen in 2015, the advance payments will more closely match the credit amount on your 2015 federal tax return. This will help you avoid getting a smaller refund than you expected or even owing money that you did not expect to owe.

Please contact the office if you have any questions about how the healthcare premium affects you and your taxes.

• By Leon Clinton
• June 20, 2015