5 Tax Benefits that you can claim when you take care of YOUR PARENTS & RELATIVES

5 Tax Benefits that you can claim when you take care of YOUR PARENTS & RELATIVES

by | Feb 28, 2019 | income tax, Tax benefits, Tax credits, Tax Planning, Tax Preparation

5 Tax Benefits that you can claim when you take care of YOUR PARENTS & RELATIVES? 

Tax Benefits ,A considerable amount of your money can get into medical related expenses when it comes to taking care of parents or relatives. Here are the five Tax Benefits

According to Caring.com, a company that specialized in Bankrate, about 40% of caregivers spend about $5,000 a year on caregiving. Similarly, about 25% of people spend more than $10,000 per year on caregiving.

Though it is not the primary concern paying for caregiving expenses can help you avail some tax benefits. One of the key points that you need to be aware of is that your elderly parents are declared as dependents.

Here are some of the benefits that you can claim if you take care of your dependent parents or relatives.

  • Medical Expenses

Having elderly parents can result in quite a considerable sum of money being spent on medical expenses. You have the option of claiming them as Itemized Deductions in Schedule A of your income tax.

  • Itemized Deduction comes in handy if you have exceeded the standard deduction limit.
  • The total medical related expenses must be more than 7.5% of your total adjusted gross income for a fiscal year.
  • The expenses include hospital care, visit(s) to doctors, cost of prescription drugs and so on.
  • January 2019 onwards, you will be able to claim only unreimbursed medical expenses if they exceed 10% of your adjusted gross income.

  • Income Simulation

The IRS has set a few criteria that your parents must meet before you can declare them as dependents on your tax returns. Here are some of them.

  • Your parents should not have an income that exceeds the exemption amount for the year in question.
  • The IRS decides the exemption amount and the value might change year on year.
  • In the event, your parent(s) have income from dividends or interests, a portion of their social security might also be taxable.
  • The IRS publication 501 consists of the exemptions for the current year.

  • Providing Support

If you provide support to your parents for at least half of the fiscal year, there are a few tax benefits that you can avail. The following are some factors that you need to consider before determining the support amount.

  • You would need to find out a fair market value for the room. If someone were to rent the room out, how much would they pay for it?
  • The next step would be to include expenses related to food. One needs to be careful and not include utility bills, medical bills or other general expenses that you incur.
  • The amount that you want to claim as support should exceed the income of your parent(s) by a minimum of $1.
  • A comparison between the income that they receive, social security or other income and the support that you lend will paint a clearer picture of support requirements.

  • Care Credit

Dependent care is a non-refundable tax credit that you can benefit from. In the event that your parent is a qualifying individual, you can claim for it. Here is all that you need to be aware of.

  • Parents who are physically or mentally unable to take care of themselves are qualified individuals.
  • You should have an income and certain work-related expenses to show, so as to qualify for the tax credit.
  • You should be able to identify your care provider properly.

  • Supporting Siblings

In the event that you support your parents along with siblings, you can claim the amount as well. The only condition being that each sibling must contribute to at least 10% of the total support expenses.

The above tax benefits will aid you in taking care of dependent parents or relatives.

4 Tax Benefits that you should not miss if YOU ARE PARENT

4 Tax Benefits that you should not miss if YOU ARE PARENT

by | Feb 11, 2019 | Investment & Income, Tax Planning, Tax Refund

4 Tax Benefits that you should not miss if YOU ARE PARENT?

4 Tax Benefits ,Being a parent is not easy and not is it cost-effective.  Tax creditRight from the moment of birth, you must endure expenses such as diapers, baby food, toys and other essentials. It is possible that one might get a bit exhausted and hope for a quick break.

Well, the quick break is there for your taking in the form of tax benefits.You can claim your parenting related expenses, which will in turn lower your liable taxes via deductions and tax credits. Here is a list of few tax benefits that you as a Parent should not miss or ignore.

  • Child Tax Credit

Tax credits essentially lower your taxes dollar for every dollar spent. If you have a few kids, you can use these tax credits to lower your taxes by a considerable margin. However, you can claim the credits for only qualifying children. Here are a few conditions.

  • You children must be below 18 years of age.
  • Your children must be a citizen of the USA, or a resident alien or a national.
  • You must declare your children as dependent on your tax claims.
  • Your children must be living with you for at least half of a financial year.
  • You can declare your own children, step children, foster children, half brother or sister, or a dependent such as grandchildren as your dependents.

You can claim the credits for several children, as long as you declare them as dependent and they are not listed as dependenton anyone else’s tax filing.

  • Adoption Tax Credit

With the help of adoption tax credit, you can easily offset some of the expenses related to adopting a child. Of course, there are few limitations when it comes to income and amount that you can claim per child. Here are a few expenses that you can claim under this clause.

  • Travel expenses related to court.
  • Food expenses related to court.
  • Attorney and court related fees.

In the event that you adopt a child with special needs, you can claim the entire Adoption tax credit. Irrespective of whether or not it surpasses your actual expenses. Since it is non-refundable, you must ensure that it doesn’t exceed your actual tax liability.

  • Higher Education Credits

Sending your kid for higher education is not cheap these days. Here are two credits that you can avail.

  • Lifetime Learning Credit (LLC)
  • American Opportunity Tax Credit (AOTC)

You can use the AOTC for up to four years, whereas the LLC can be carried forward as long as your kid pursues education.

The following expenses qualify for the above credits.

  • Tuition fees
  • Enrollment related fees
  • Expenses related to school materials

There are certain clauses in AOTC, which allows you for tax credit even if that results in zero tax liabilities.

  • Student Loan Deduction

You can avail deductions in your tax filing based on the payments that you have made for student loans. Since it is a deduction, you can reduce your net taxable income and thus lower the taxes.Here are a couple of conditions that are applicable.

  • A student loan should come from a qualified institution.
  • The loan should not be from any relative.
  • There are certain income limits that apply to deductions.
  • Your child’s enrollment for the degree should be more than half of the duration.

For the fiscal year 2016, as many as 19,273,883 taxpayers had opted for child tax credit. You can be one of them and save your hard earned money.

5 Tax Benefits you should avail when you are MOVING for JOB / BUSINESS Purposes

5 Tax Benefits you should avail when you are MOVING for JOB / BUSINESS Purposes

by | Feb 8, 2019 | Deduction & Credits, New Business

5 Tax Benefits you should avail when you are MOVING for JOB / BUSINESS Purposes?

Changing jobs is a part and parcel of life. One can either look for better job opportunities or could be unfortunately part of corporate downsizing. In either case, there could be quite a few tax implications and impacts on your Tax  benefits.

Being aware of them will help you overcome such situations gracefully. Here are the top tax benefits that you should not forget while switching jobs or businesses.

Withholding Tax

A vast majority of employees have a lot of taxes deducted from their paycheck. In fact, the number stands at about 100 million people receiving a fat refund cheque. With a new job, you have the option to set it right.

  • With your new employer, it is time to revisit your W4 form.
  • Allowances section in the form determines the amount of taxes that you will have to pay or the amount that is withheld from your income.

Moving Expenses

Changing jobs at times might lead to a change of location as well. If you have undergone a similar experience, you can claim the amount. Here is all that you should be aware of.

  • The expenses should be reasonable and associated with transportation of personal and household items to the new location.
  • In the event that you are unable to move immediately, you can claim expenses related to storage unit up to 30 days.
  • The claim can include your as well as other members of the family’s travel expenses.
  • Should you decide to drive to the new location, you can include fuel costs, parking bills, tolls, etc.
  • If the distance is far and you end up using trains or flights, you can claim them as well.
  • You can claim for these expenses in your current year using IRS’s Form 3903 and attach it with your tax returns.

Expenses related to Job Hunting

The IRS always allowed for job hunting-related expenses. Here are a few facts that you should be aware of.

  • But prior to 2018, the same deductible as a miscellaneous expense, provided you itemize it under Schedule A.
  • The expenses had to be in excess of 2% of your adjusted gross income.
  • You can now claim itemized deductions for job hunting even if the outcome was not favorable.
  • It is important that the line of work remains the same while doing the job search.
  • The usual expenses covered include any fees paid to employment services or agency, travel-related expenses or costs for mailing or printing out resumes.

Selling your house

There is a feeble possibility that you might plan to sell your house owing to a change in job location. In such cases, capital gains taxes will come into the picture. The following points will aid you.

  • Capital gains up to $250,000 on the sale of a house or $500,000 if married filing jointly, is non-taxable, provided you have stayed in the house for at least two years.
  • The gains reduce to half if you have stayed for one year only. The corrected tax-free gains would remain $125,000 for individuals and $250,000 for married filing jointly status.

Retirement Savings

Changing jobs usually means a lot of confusion and chaos related to retirement savings. Employees usually take this opportunity to withdraw their 401(k) money. You must keep in mind that withdrawing the amount before you turn 55 would result in a 10% penalty. It is recommended to transfer the amount rather than withdrawing.

The above are some tax benefits that you should not overlook while moving job or business.