HOMEOWNERSHIP

  • Homeownership and your Taxes
  • Home Equity Loan Tax Deductions
  • Tax Law Change
  • Affordable Care Act Tax Provisions for Individuals and Families
  • Child Tax Credit
  • Education Credits

 

Home Ownership and Your Taxes

Homeownership is a dream of many Americans. Interest rates may fluctuate, and economic circumstances may change, but owning a home remains an attainable goal. Americans have enjoyed an era of low interest rates and these, coupled with the economic stimulus package for new home buyers, make homeownership affordable for many.

Homeowners deduct their mortgage interest if they itemize their deductions. Itemizing is generally more beneficial than taking the standard deduction.

 

Home Equity Loan Tax Deductions

If you took the loan out to buy a second home or to improve your home. If you are able to deduct your home equity loan interest, add that amount to your Schedule-A. The interest on most home equity loans is tax deductible. For more information about home equity loan tax deductions see Publication 936 (2015), Home Mortgage Interest Deduction. Or contact Start Star Income Tax for more information.

 

AFFORDABLE CARE ACT.

Individuals & Families.  What to do with the New Health Care Forms.

This year, you may receive one or more forms that provide information about your 2015 health coverage.  Check out these tax tips about what to do if you receive a Form 1095-A,1095-B or 1095-C.  This new forms may affect your individual income tax return.

The individual shared responsibility provision requires you, your spouse, and your dependents to have qualifying health insurance for the entire year, report a health coverage exemption, or make a payment when you file.  In addition, you may be eligible for the premium tax credit if you purchased health coverage through the Health Insurance Marketplace.

 

CHILD TAX CREDIT.

Child Tax Credit & Qualified Child;The Child Tax Credit is available to eligible taxpayers with qualifying children under age 17. The IRS would like you to know these eleven facts about the child tax credit. Amount With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17.

A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence.

  1. Age test: To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2015.
  2. Relationship test: To claim a child for purposes of the Child Tax Credit, the child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew.
  3. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
  4. Support test: In order to claim a child for this credit, the child must not have provided more than half of his/her own support. Dependent test You must claim the child as a dependent on your federal tax return.
  5. Joint return test: The qualifying child can not file a joint return for the year (or files it only as a claim for refund).
  6. Citizenship test: To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.
  7. Residence test: The child must have lived with you for more than half of 2015. There are some exceptions to the residence test, found in IRS Publication 972, Child Tax Credit.

 

EDUCATION CREDITS.

American Opportunity Tax Credit

American Opportunity Tax Credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education.You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you.

The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student. But, if the credit pays your tax down to zero, you can have 40 percent of the remaining amount of the credit (up to $1,000) refunded to you.

Lifetime Learning Credit

The Lifetime Learning Credit is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate and professional degree courses--including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return.

The amount of the credit is 20 percent of the first $10,000 of qualified education expenses or a maximum of $2,000 per taxpayer. The LLC is not refundable. So, you can use the credit to pay any tax you owe but you won’t receive any of the credit back as a refund.

 

An eligible student for LLC? To be eligible for LLC, the student must:

  • Be enrolled or taking courses at an eligible educational institution
  • Be taking higher education course or courses to get a degree or other recognized education credential or to get or improve job skills
  • Be enrolled for at least one academic period* beginning in the tax year

*Academic Period can be semesters, trimesters, quarters or any other period of study such as a summer school session. Academic periods are determined by the school. For schools that use clock or credit hours and do not have academic terms, the payment period may be treated as an academic period.

 

TAX RATES EXTENDED: Tax rates for 2011 and 2012. Without passage of the Tax Relief Act the EGTRRA tax rates of 10%, 15%, 25%, 28%, 33% and 35% would have gone back to 15%, 28%, 31%, 36% and 39.6% starting January 1, 2011.

 

AMT “PATCH” ALTERNATIVE MINIMUM TAX: The 2010 Tax Relief Act provided another “patch” for the Alternative Minimum Tax (AMT), extending relief through 2011. Form 6251, Alternative Minimum Tax, lists the exemption amounts for tax year 2011 as:

  • $48,450 (from $47,450) for Single and Head of Household
  • $74,450 (from $72,450) for Married Filing Jointly and Qualified Widow(er)
  • $37,225 (from $36,225) for Married Filing Separately

Taxpayers can also deduct nonrefundable personal credits again in 2011 such as the child tax credit to reduce their AMT liability. Without the patch the AMT exemption amount would have decreased to $33,750 for individuals and $45,000 for joint filers.

 

UNEMPLOYMENT INSURANCE BENEFITS EXTENDED: Unemployment insurance benefits were extended through 2011 for those out of work longer than 26 weeks, but not longer than 99 weeks.

 

BUSINESS BENEFITS: Businesses were able to write off 100% of their capital investments for tax purposes for items placed in service after September 8, 2010 and through December 31, 2011, up from the 50% bonus depreciation. The 2010 Tax Relief Act also makes the 50% bonus depreciation available for qualified property placed in service after December 31, 2011 and before January 1, 2013. If a taxpayer purchased a qualified property after September 8, 2010, they will be able to claim 100% of the cost on their business return.

The “Bush Era Tax Cuts” were ushered in by two pieces of legislation. One was the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), signed into law on June 7, 2001. The biggest changes included reductions in income tax rates, estate and gift tax exclusions, and changes for retirement plan rules. In short, it lowered tax rates and simplified retirement plan rules. The second phase of “Bush Era Tax Cuts” took effect with the passage of The Jobs and Growth Tax Relief Reconciliation Act of 2003 ("JGTRRA”). This act provided lower taxes from dividends, capital gains, and estate taxes, and an increase of the exemption amount for the Alternative Minimum Tax.

 

TAX INTERVIEW-CHECKLIST

  • Name
  • Date of Birth
  • Social Security Card /ITIN/ATIN
  • Valid Driver’s License
  • Last year's tax Return

INCOME AND UNEARNED INCOME TAX INFORMATION

  • W-2’s
  • Interest  1099-INT or substitute
  • 1099-DIV or substitute
  • Estimated taxes paid
  • Self-Employment Income and Expenses
  • Stock Sales 1099-B or Broker Statement
  • Sale of a Personal Residence
  • Miscellaneous Income 1099-MISC
  • Rental Income and Expenses
  • Gambling or Lottery Winnings W-2G
  • State Income Tax Refund 1099-G
  • Pension Income 1099-R
  • Social Security or Railroad Retirement SSA-1099 or RRB-1099
  • IRA or 401-k Distribution 1099-R
  • Unemployment Compensation 1099-G

ADJUSTMENTS & DEDUCTIONS

  • Medical Expenses
  • Real Estate or Personal Property Taxes
  • Educator Expenses
  • Mortgage Interests
  • Student Loan Interest
  • Charitable Contributions Student Loan Interest
  • Employee Business - Expenses
  • Gambling Losses
  • Moving Expenses
  • Traditional IRA Contributions
  • Higher Education Expenses

 TAX CREDITS

  • Child Care Provider/Address and Social Security Number (SSN)
  • Child Adoption Expenses
  • Retirement Savings and Contributions