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Saturday, July 12, 2014

Many new tax deductions available

Sunday, January 31, 2010

With the economy still down and unemployment numbers up, taxpayers are looking for every deduction possible.

Tony Smiley, Manager of Stadler & Co., Brazil, recently spoke with The Brazil Times about some of the lesser-known deductions which could have a big effect on tax returns.

"So far this year, we have been receiving more questions about who may be claimed as a dependent, particularly because of the high level of unemployment in the current economy," Smiley said.

Smiley told The Brazil Times an individual may be claimed as a dependent if the person filing a return provided more than 50 percent of the potential dependent's support.

"The person does not necessarily have to be living in your house for them to possibly be considered a dependent," he said. "But, if you are providing more than 50 percent of their support, such as rent, groceries and other bills, you may claim them on your return."

He added there is other criteria which allows a taxpayer to claim a dependent on their return, most notably if the "dependent" made less than $3,500 in 2009.

Back again this tax year is the First-Time Homebuyer Credit, which Smiley said is in its third generation.

"The $8,000 credit is still available for first-time homebuyers purchasing a principal residence with the sale final between Jan. 1, 2009 and April 30, 2010," he said. "However, new this year is a $6,500 credit for move-up/repeat homebuyers."

To be eligible for the tax credit, the individual or couple must have resided in the same home for at least five consecutive years in the eight years prior to the new purchase date, which must have a binding sales contract signed between Nov. 6, 2009 and April 30, 2010, with the purchase finalized by June 30, 2010.

"There are a number of types of homes which qualify for the repeat homebuyer credit as long as the purchase cost is equal or less than $800,000, which probably would not come into play in this area," Smiley said. "These include single-family detached homes, townhouses, condos, manufactured homes, and even houseboats."

Other new credits/deductions Smiley mentioned includes:

* Vehicle credits -- Taxpayers may write off the sales tax on purchases of new cars only, as long as the purchase was completed between Feb. 17 and Dec. 31, 2009,

* American Opportunity Tax Credit -- In lieu of the Hope Tax Credit, this applies only to the first four years of post-secondary education (after high school) for a maximum of $2,500, and

* Residential Energy Credit -- May be taken for any energy efficiency improvement that will remain intact for at least five years. This includes, but not limited to, improvements to exterior windows and doors, and the installation of water heaters, solar technology, central air conditioning and furnaces.

Smiley added another new change is with the Earned Income Credit.

"In previous years, two children was the maximum, but this year there is a new tier for those with three children," he said. "If someone has three children, the maximum earned income allowed to receive a credit is $43,279 if single and $48,279 on joint returns."

He also provided some advice for married couples who may be filing separately.

"In situations where a couple is separated, but not officially divorced, the person who files their taxes first sets the bar as to what credits may be claimed," Smiley said. "For example, if your spouse itemizes their deductions, you cannot claim the standard deduction."

Although employers are required to provide an employee's W-2 and 1099 forms by Jan. 31, Smiley said returns may be filed without that information.

"If you have a problem getting your W-2 or 1099, one option taxpayers have is to go ahead and file with the information they have because employers have to also send copies of those forms to the Social Security Administration and IRS," he said. "Chances are the IRS will send them a notice of unreported income, but they can provide that information after the notice is sent and an amended tax return may be filed within the following three years.

This year, the deadline to file a tax return falls on Thursday, April 15, 2010, and for more information about other new and changed tax laws, along with tax forms, log on to www.irs.gov.


Should I file joint or separate?

During tax time, married couples have to decide whether to file a joint return, or one labeled "Married filing separate."

Stadler & Co. Manager Tony Smiley said nine times out of 10, a joint return should be filed, but provided some suggestions to make the decision easier.

Joint return advantages

* Being married puts you into a lower tax bracket compared to a "Married filing separate" return,

* Eligibility for more deductions and credits, and

* Filing a joint return takes less time and costs less than filing separate returns.

When you could be "Married filing separate"

* If one of the individuals has outstanding federal or state debts, such as student loans or owing back taxes. Credit card and medical debts do not qualify,

* If back child support is owed, or

* If the couple is separated without officially being divorced and residing in separate locations.

Smiley advises residents who are unsure about which status they should file under to seek advice from a tax professional to determine the best plan of action.



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