You may be entitled to beneficial tax credits when you have children. Some credits are specifically aimed at parents and can be extremely helpful in saving money or in compensating for the cost of raising children. You can claim your child as a dependent in most scenarios, including children who were just born in the current tax year. The following credits are available to parents who meet the qualifications:
Child Tax Credit: You may be eligible to claim the Child Tax Credit for every child under the age of 17 by the end of the tax year you claim as a dependent. The total credit amount is $2,000 per child, but you can qualify for an additional child tax credit if you receive a smaller amount.
Child and Dependent Care Credit: You can claim this credit if you have paid another party for the care of a qualifying person. This benefit applies to any child care expenses incurred for a child under 13 years of age while working or looking for a job.
Earned Income Tax Credit: There is a tax credit for those who earned less than $54,884 in 2018 that can be particularly beneficial for working parents. Parents with three eligible children can earn up to $6,431 of the Earned Income Tax Credit, which must be claimed on their return. Adoption credit: There is a credit for parents who have taken a child during the tax year to claim some of the costs incurred.
Higher education credits: There are two separate post – secondary education credits, which can help reduce higher education costs. You may be eligible to receive either the American Opportunity Credit or the Lifetime Learning Credit if you have paid the expenses to attend college for you or an employee. Both can reduce your federal taxes and the American Opportunity Credit can be reimbursed up to $1,000.
Student loan interest: You can deduct interest paid on certain student loans without separately listing all your deductions on your return.
New rules apply this year to taxpayers who want to deduct any type of medical expenses from their tax return. These new rules may affect your return and before you file you should be aware of them. If you seek deductions for your medical or dental expenses, familiarize yourself with the following guidelines.
Gross adjusted income: This tax year your medical expenses must be more than 7.5% of your adjusted gross income in order to claim a deduction.
Itemize: To claim medical or dental expenses, you must specify your deductions. These expenses can not be claimed in a federal tax return by means of a standard deduction.
Payment during tax year: only expenses you paid during 2018 can be claimed. For check payments, the payment date is usually determined by the day on which the check was delivered or mailed, not the day on which it was paid.
Out of Pocket Costs: Any costs reimbursed by insurance coverage or other third party agency shall not be deducted. You can only pay for yourself, your spouse and your dependents for medical and dental expenses.
Qualifying costs: You can deduct any costs related to the diagnosis, relief, prevention or treatment of an illness. In addition, you can deduct premiums paid for medical coverage and long – term health insurance policies. Expenses for prescription drugs and insulin may also be eligible.
Travel: You may be able to deduct any expenses incurred as a result of using public transport, paying tolls or parking, or using an ambulance if you have had to travel to get medical care. If you use your own vehicle, the standard 2018 medical travel mileage rate is 18 cents per miles.
Can’t Double Dip: If you pay a health savings account or a flexible spending arrangement for any medical expenses, you can not deduct them. Payments from these plans are typically already tax – free.
Health insurance premiums can be expensive, but fortunately there is a tax credit that can help offset the costs for moderate family income. To claim the premium tax credit, three requirements must be met: health insurance coverage must be obtained through the health insurance market. You can select a plan during the open registration period from 15 November 2018 to 15 December 2018.
You can not qualify for Medicare, Medicaid or any other coverage, including employer coverage, which covers a substantial portion of your external costs. When you register for coverage through the market, you can be informed that you are potentially eligible for the premium tax credit. If this happens, you can choose two options from. You can either choose to have the estimated credit amount directly applied to the insurance company, which will reduce your monthly costs instantly throughout 2018, or you can wait for your 2018 tax return and receive the credit in your 2018 return. If you have chosen the latter option, your tax requirement may change. It can increase or decrease your reimbursement. If you apply the credit to your monthly premiums, any changes in your income or family status can change your eligible credit amount. If the credit you receive does not match the figures in the tax return for 2018, you are responsible for any excess amounts paid. Instead, you can get a refund if you have overpaid. Therefore, it is important that you inform the market about all changes in income and family size during the 2018 tax year, so that you receive the appropriate credit.
The right filing status can not only affect how much you owe, but also what credits you are eligible to receive. The filing status you choose can actually determine if you must file a tax return. For IRS purposes, anyone married on or before 31 December is deemed to be married for the whole tax year. For same-sex married couples, special rules apply. Whatever your current residence, if you and your spouse have been married in a state or country that legally recognizes same – sex marriage, you must file in marriage status. It does not matter whether or not your current home recognizes same-sex marriage. If there are more than one filing status, you should choose the one with the lowest tax obligation. For tax returns, five different filing statuses are:
Single. If you are not legally married or if you are divorced or separated under state law, this is your status.
Married filing jointly. For the couple, one tax return is filed together. A spouse who died in the tax year 2018 still has the right to a joint return. After the first year, the surviving spouse may file for the next two years under the Widow status. Separately married filing. A married couple can file separately instead of submitting a return together. This reduces the tax liability of the couple in some cases, but it is also used for those who only want to be responsible for their own taxes.
Head of household. If you are not married, this status may apply if you have paid for yourself and an eligible dependent more than 50 percent of your living expenses. This status is often misused, so when selecting this status it is important to be very careful.
Qualified widow(er) wit dependent child. In addition to other conditions, this status may apply to anyone whose spouse died in the last two fiscal years. Anyone whose spouse died in 2016 or 2017 can be eligible for this year if the additional requirements are met.
Since it was introduced nearly 45 years ago, earned income tax credit has boosted the income of low and moderate income staff. The IRS reports that four out of every five EITC employees claim the benefit, but they would like to see everyone who qualifies benefit from it. If you qualify, this tax credit can help you to make this tax season a little more room for your budget. Some facts about the EITC you need to know: eligibility: even if you have not previously qualified, if your family or financial situation has changed, you may be eligible for this year. Review the requirements annually, as you must claim your tax credit in order to receive it. You have to work throughout the year and earn less than $54,884 in income. You can still file a credit claim even if you do not have to file a tax return.
Rules: The EITC has a certain set of guidelines and it is important to correctly follow them in order to obtain the credit. Consider this: You can not file separately Married Filing. All parties listed on the return must have a valid Social Security Number (you, your spouse and dependent children). Income like wages, self – employment and agricultural income must have been earned in the tax year. You may be eligible for credit if you are married or single, whether or not you have children. However, without children, you have to meet additional restrictions on age, residence and dependency. For all military personnel serving in a fighting zone, special guidelines apply. The income tax credit can reduce the amount of federal taxes you owe that can reimburse you. Qualified taxpayers may receive up to $6,431 of a credit. That’s enough reason to see if you qualify today!
Many taxpayers who receive a refund choose to deposit directly. Actually, it is the best way to receive payment for a federal tax refund. It is completely safe and delivers the cash you have the right to, especially when combined with electronic filing methods, quickly and easily. About 95 million taxpayers opted for direct deposits in 2018 and its popularity is expected to continue in 2019.
When you submit this tax season, consider directly placing your refund on your bank account. Four reasons for choosing a direct deposit–It’s so easy, it’s nearly too easy. Almost. Almost. With a direct deposit, your refund is automatically credited to your bank account and you save the steps of actually going to the bank, waiting in line and depositing the check. Security–Since no physical check is issued, you don’t have to worry about it being lost or stolen or waiting to be sent in the mail. Simplicity–Again, almost nothing is done. You just have to choose the direct deposit option in the tax software or check the tax forms section. Both will have detailed instructions, which essentially only require your bank account number and routing.
Choices–you can let the government do it for you instead of transferring your money around. You may decide to divide your refund into three separate bank accounts. In addition to the checking and savings accounts, various pension plans, health or education accounts may be eligible for deposit. You should check with your bank before you decide to deposit directly if you file your tax with your spouse. Some financial institutions require both names to be included in the deposit. In addition, you should never deposit your refund into the account of another person. Always ensure that you have the correct bank account number and that the account is either in your name or in the name of your spouse, if not both.
If you heard about the Alternative Minimum Tax, you probably wonder if it applies to you and what to expect if it applies. If your income exceeds a specific amount, you may fall under the Alternative Minimum Tax guidelines. The purpose of the AMT is to keep a minimum tax payment for those who choose certain credits. Some important fact about the AMT that you should know in order to better prepare this tax season: if your taxable income, including adjustments, is higher than the AMT exemption amount based on the filing status you use, you will be required to pay. Individuals with an annual income below the exemption amount usually do not have an AMT.
The Alternative Minimum Tax (AMT) exemption amount rises in 2018 to $95,750 ($191,500, for married couples filing jointly).
Alternative minimum tax guidelines are more detailed than regular income tax rules, so it is important to know that you are correctly filing. The use of tax software can make it easy and accurate to file your return. Electronic filing software can calculate your AMT automatically, if you have to pay. You must file Form 6251, Alternative Minimum Tax for individuals, if you owe the tax.
Personal or investment property owned by you is typically a ” capital asset. ” Examples include materials such as a house or a car and investment items such as stocks and bonds. When a capital asset is sold, capital gains or losses occur. Whether you consider selling a capital gain or loss depends on the amount you receive for the asset compared to what you originally paid for it. Any profits in capital must be included in your annual income. Those with a net investment income above the statutory threshold have been subject to a net investment income tax of 3.8 per cent. NIIT applies to persons, properties and trusts. The loss of capital can be deducted from the sale of investment property, but not from personal property. vs. Long-Term. Short – term Whether a capital gain or loss is considered to be long – term or short – term depends on the duration of the property’s time.
The property owned for more than one year falls under the long – term definition, while the property owned for less than one year is regarded as short – term. A person who earns longer – term gains than losses is considered to have a net long – term gain. A ” net capital gain ” is achieved when net long – term gains exceed short – term losses. Tax rates Net capital gains tax rates will vary depending on income. The maximum net tax on capital gains increased is 20% in 2018 and many taxpayers still fall below the 0 or 15% rate. Certain types of net capital gains may be subject to a tax rate of 25%-28%. Capital loss can be deducted if it is more than any capital gains. You can claim them in your tax return as a loss, although they are limited to $ 3,000 per year. If you are married but file separate returns, you have a capital loss deduction of $ 1,500. If you have a net loss of capital above the maximum limit, you can deduct the amount remaining in the tax return of the following year, treating the loss as if it occurred during that year. To report capital gains and losses, you must submit Form 8949, Sales and other capital asset provisions. In addition, you must submit your regular federal tax return with Schedule D, capital gains and losses.
Tax time can be confusing if you are a self – employed. It is not difficult to file a federal tax return, and with a little information, independent contractors and small business owners can easily file returns just like the rest of the taxpayers. Understanding what is classified as self – employed income and your tax liability is key to a smooth process of filing. Follow these tips for easy implementation of taxes.
Income from self-employment includes anything you made doing part time work as well as profits from your regular job. When filing a return, you are required to include a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business with your Form 1040.
If you have profited from work or your business, you may be subject to a self-employment tax, which includes Medicare and Social Security taxes. To determine the amount of the tax you have to pay, fie Schedule SE, Self-Employment Tax, with your regular return.
You can be charged penalty fees if you haven’t paid enough taxes, so it’s critical to keep records of all deductions and payments. You may be required to make tax payments, based on income that isn’t subject to withholding, to ensure you don’t get penalized.
Any deductions must be deemed necessary, and can’t be uncommon. The expense must be typical to your industry, and required to help your business run smoothly and efficiently.
Not much can make you happy when it’s time to pay taxes. During the tax season, the tax credit can be your friend and ally, so it is important to know for which credits you can qualify. Tax credits reduce the amount of tax that you pay and some of them are even reimbursable. You can still get a refund if you qualify for a refundable credit even if you do not have to pay any taxes. The following five tax credits can make taxation time a bit more friendly.
For those who work but don’t make a lot of money, Earned Income Tax Credit is available. You can earn up to $6,431 credit and can be reimbursed. Eligibility is based on total income, status of filing and number of employees. Under certain circumstances, individual employees with zero employees are eligible for credit.
Child and Dependent Care Credit is available to those who use daycare or daycare services to provide children under 13 years of age with child care. This tax credit is not only for children and can be claimed for expenses for a disabled spouse or other dependent adult.
Child Tax Credit reduces your tax liability by $ 2,000 for each child under the age of 17, which you claim to be a household dependent. There are additional requirements for eligibility, although this credit can help to compensate for the costs of raising children.
The saver’s credit is available to people planning to retire. If you contribute through your employer to a pension plan or IRA and your income is less than $ 60,000 per year, you can qualify.
American Opportunity Tax Credit can help to make the four – year college after high school a bit cheaper. Each eligible student may receive up to $ 2,500 if he or she is enrolled for a full academic period of at least half time. This credit requires that you complete Form 8863, Education Credits, to be included in your tax return, even if you do not owe anything.