Tax

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Tax Benefits for Parents

Taxpayers with children may qualify for certain tax benefits. Parents should consider child-related tax benefits when filing their federal tax return:

1. Dependent. Most of the time, taxpayers can claim their child as a dependent. Taxpayers can generally deduct $4,050 for each qualified dependent. If the taxpayer’s income is above a certain limit, this amount may be reduced. If you need help figuring out whether your child can be claimed as a dependent on your tax return, please call the office.

2. Child Tax Credit. Generally, taxpayers can claim the Child Tax Credit for each qualifying child under the age of 17. The maximum credit is $1,000 per child. Taxpayers who get less than the full amount of the credit may qualify for the Additional Child Tax Credit. Not sure if your child qualifies for the Child Tax Credit? Give the office a call.

3. Child and Dependent Care Credit. Taxpayers may be able to claim this credit if they paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. Taxpayers must have paid for care so that they could work or look for work. Even if you don’t have dependent children, if you care for an elderly relative and can claim him or her as a dependent, you might be able to take the Child and Dependent Care Credit if you work or are looking for work. Please call for details.

4. Earned Income Tax Credit. Taxpayers who worked but earned less than $53,505 in 2016 should look into the EITC. They can get up to $6,269 in EITC. Taxpayers may qualify with or without children.

5. EITC and ACTC Refunds. Because of new tax-law change, the IRS is not able to issue refunds before February 15 for tax returns that claim the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). This applies to the entire refund, even if a portion of the refund is not associated with these credits.

6. Adoption Credit. It is possible to claim a tax credit for certain costs paid to adopt a child. For details, see Form 8839, Qualified Adoption Expenses.

7. Education Tax Credits. An education credit can help with the cost of higher education. Two credits are available: the American Opportunity Tax Credit and the Lifetime Learning Credit. These credits may reduce the amount of tax owed. If the credit cuts a taxpayer’s tax to less than zero, it could mean a refund. Taxpayers may qualify even if they owe no tax. Complete Form 8863, Education Credits, and file a return to claim these credits.

8. Student Loan Interest. Taxpayers may be able to deduct interest paid on a qualified student loan. They can claim this benefit even if they do not itemize deductions. If you’re not sure if interest you paid on a student or educational loan is deductible, don’t hesitate to call.

Questions about credits and deductions?

Don’t hesitate to call the office today.

Tax

Cut your Tax Bill with Home Energy Credits

Did you know that it’s possible to trim your tax bill and save on your energy bills with certain home improvements? Here are some key facts you should know about home energy tax credits:

Non-Business Energy Property Credit

  • Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
  • The other part of the credit is not a percentage of the cost. It is for the actual cost of certain property. This may include items like water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
  • This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
  • Your main home must be located in the U.S. to qualify for the credit.
  • Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. It is usually posted on the manufacturer’s website or included with the product’s packaging. You can use this information to claim the credit, but do not attach it to your return. Keep it with your tax records.
  • You may claim the credit on your 2016 tax return as long as you haven’t exceeded the lifetime limit in past years. Under current law, this credit is only available through December 31, 2016, for qualifying improvements to a taxpayer’s main U. S. home.

Residential Energy Efficient Property Credit

  • This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
  • Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
  • There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
  • The home must be in the U.S. It does not have to be your main home unless the alternative energy equipment is qualified fuel cell property.
  • This credit is available through 2016.

To claim these credits use Form 5695, Residential Energy Credits. If you would like more information on this topic, please call.

Tax

Medical and Dental Expenses May Impact Your Taxes

Medical expenses can trim taxes. Keeping good records and knowing what to deduct make all the difference. Here are four tips to help taxpayers know what qualifies as medical and dental expenses:

1. Itemize. Taxpayers can only claim medical expenses that they paid for in 2016 if they itemize deductions on a federal tax return.

2. Qualifying Expenses. Taxpayers can include most medical and dental costs that they paid for themselves, their spouses and their dependents including:

  • The costs of diagnosing, treating, easing or preventing disease.
  • The costs paid for prescription drugs and insulin.
  • The costs paid for insurance premiums for policies that cover medical care.
  • Some long-term care insurance costs.

Exceptions and special rules apply. Costs reimbursed by insurance or other sources normally do not qualify for a deduction. More examples of what costs taxpayers can and can’t deduct are in IRS Publication 502, Medical and Dental Expenses.

3. Travel Costs Count. It is possible to deduct travel costs paid for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. For use of a car, deduct either the actual costs or the standard mileage rate for medical travel. The rate is 19 cents per mile for 2016.

4. No Double Benefit. Don’t claim a tax deduction for medical expenses paid with funds from your Health Savings Accounts (HSAs) or Flexible Spending Arrangements (FSAs). Amounts paid with funds from these plans are usually tax-free.

If you’re wondering whether your medical and dental expenses are deductible on your tax return, don’t hesitate to contact the office.

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