It is important for you to know the tax credits that may apply to you. SKS Tax Service can assist you to find those credits you may utilize on your federal income tax form to increase the tax refund you receive or decrease the amount you have to pay.
Child Tax Credit
This credit is for people who have a qualifying child as defined below. The maximum amount you can claim for the credit is $1,000 for each qualifying child.
A qualifying child for purposes of the child tax credit is a child who:
- Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendent or any of them (for example; your grandchild, niece, or nephew)
- Was under age 17 at the end of 2014
- Did not provide over half of his or her own support for 2014
- Is claimed as a dependent on your return
- Does not file a joint return for the year (or files only as a claim for a refund)
- Lived with you for more than half of 2014
- Was a U.S. citizen, U.S. national, or U.S. resident alien.
Limits on the Credit
Your child tax credit may be reduced if either rule applies.
- If the amount of your tax liability is zero, you cannot take this credit because there is no tax to reduce.
- Your modified adjusted gross income is above the amount shown below for your filing status.
- Married filing jointly – $110,000.00
- Single, head of household, or qualifying widow(er) – $75,000.00
- Married filing separately – $55,000.00
Additional Child Tax Credit
This credit is for certain individuals who get less than the full amount of the child tax credit. The additional child tax credit may give you a refund even if you do not owe any tax.
Child and Dependent Care Credit
You may be able to claim the Child and Dependent Care Credit on your federal income tax return if you paid someone to care for your child, spouse, or dependent last year. Below are 10 things the IRS wants you to know about claiming a credit for child and dependent care expenses.
- The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 13 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.
- The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.
- You – and your spouse if you file jointly – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.
- The payments for care cannot be paid to your spouse, to the parent of your qualifying person, to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return.
- Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.
- The qualifying person must have lived with you for more than half of the year. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents. See Publication 503, Child and Dependent Care Expenses.
- The credit can be up to 35% of your qualifying expenses, depending upon your adjusted gross income.
- You may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
- The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income.
- If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. See Publication 926, Household Employer’s Tax Guide.
Your child and dependent care expenses must be for the care of one or more qualifying persons. A qualifying person is:
- Your qualifying child who is your dependent and who was under age 13 when the care was provided.
- Your spouse who was physically or mentally not able to care for himself or herself and lived with you for more than half the year, or
- A person who was physically or mentally not able to care for himself or herself, lived with you for more than half the year, and either:
- Was your dependent, or
- Would have been your dependent except that:
- He or she received gross income of $3,900 or more,
- He or she filed a joint return, or
- You or your spouse, if filing jointly, could be claimed as a dependent on someone else’s return.
Child of divorced or separated parents or parents living apart.
Even if you cannot claim your child as a dependent, he or she is treated as your qualifying person if:
- The child was under age 13 or was physically or mentally not able to care for himself or herself,
- The child received over half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or lived apart at all times during the last six months of the calendar year,
- The child was in the custody of one or both parents for more than half the year, and
- You were the child’s custodial parent (the parent with whom the child lived for the greater part of 2014).
The non custodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents.
Trust SKS Tax Service to uncover and find all the credits and deductions you are entitled to. With our expertise, you will be given the maximum refund amount. Here is a checklist of Legal Deductions you may qualify to receive.
The following deductions fall into 5 categories:
- Property Taxes
- Mortgage Deductions
- Casualty and Theft
- Overlooked Deductions
- Miscellaneous Deductions
Personal Property Taxes
Personal property tax is deductible if it is a state or local tax that is:
- Charged on personal property,
- Based only on the value of the personal property, and
- Charged on a yearly basis, even if it is collected more or less than once a year.
A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. For example, a yearly tax based on value qualifies as a personal property tax even if it is called a registration fee and is for the privilege of registering motor vehicle or using them on the highways.
Real Estate Taxes
Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. You can deduct these taxes only if they are based on the assessed value of the real property and charged uniformly against all property under the jurisdiction of the taxing authority.
Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. They also do not include itemized charges for services (such as trash collection) assessed against specific property or certain people, even if the charge is paid to the taxing authority.
Interest is an amount you pay for the use of borrowed money. To deduct interest you paid on a debt you must be legally liable for the debt. Additionally, you generally must itemize your deductions, unless the interest is on rental or business property or on a student loan.
Home mortgage interest is interest you pay on a loan secured by your main home or a second home. The loan may be a mortgage to buy your home, a second mortgage, a home equality loan, or a line of credit.
Your main home is where you live most of the time. It can be a house, cooperative apartment, condominium, mobile home, house trailer, or house boat that has sleeping, cooking, and toilet facilities.
A second home can include any other residence you own, and treat as a second home. You do not have to use the home during the year. However, if you rent it to others, you must also be able to use it as a home during the year for more than the greater of 14 days or 10% of the number of days you rent it, for the interest to qualify as home mortgage interest.
Home mortgage interest and points are generally reported to you on Form 1098, Mortgage Interest Statement, by the financial institution to which you made the payments.
Home Mortgage Points
The term “points” is used to describe certain charges paid to obtain a home mortgage. Points may be deductible as home mortgage interest, if you itemize deductions on Form 1040, Schedule A. If you can deduct all of the interest on your mortgages, you maybe able to deduct all of the points paid on the mortgage.
You can deduct all the points in full in the year they are paid, if all the following requirements are met:
- Your loan is secured by your main home (the one you live in most of the time).
- Paying points is an established business practice in your area.
- The points paid were not more than the amount generally charged in that area.
- You use the cash method of accounting. This means you report income in the year you receive it and deduct the expenses in the year you pay them.
- The points were not paid for items that usually are separately stated on the settlement sheet such as appraisal fees, inspection fees, title fees, attorney fees, or property taxes.
- The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. You cannot have borrowed the funds from your lender or mortgage broker in order to pay the points.
- You use your loan to buy or build your main home.
- The points were computed as a percentage of the principal amount of the mortgage, and
- The amount is clearly shown on your settlement statement.
Mortgage Insurance Premiums
You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. The insurance must be in connection with home acquisition debt, the insurance contract must have been issued after 2006.
Qualified Mortgage Insurance
Qualified mortgage insurance is mortgage insurance provided by the Department of Veteran Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006).
Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. If provided by the Rural Housing Service, it is commonly known as guarantee fee. Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098.
Casualty and Theft
Casualty and Theft
Generally you may deduct losses to your home, household items and vehicles on your Federal income tax return. You may not deduct casualty and theft losses covered by insurance unless you file a timely clam for reimbursement and you must reduce the loss by the amount of the reimbursement.
A casualty does not include normal wear and tear or progressive deterioration from age or termite damage. The damage must be caused by a sudden, unexpected, or unusual event (e.g. car accident, fire, earthquake, flood, vandalism).
A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual.
- A sudden event is one that is swift, not gradual or progressive.
- An unexpected event is one that is ordinarily unanticipated and unintentional.
- An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged.
Deductible casualty losses can result from a number of different causes, including the following.
- Car accidents
- Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster
- Mine cave-ins
- Sonic booms
- Storms, including hurricanes and tornadoes
- Terrorist attacks
- Volcanic eruptions
A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent.
Theft includes the taking of money or property by the following means:
- Kidnapping for ransom
The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law.
Proof of Loss
To deduct a casualty or theft loss, you must be able to show that there was a casualty or theft. You also must be able to support the amount you show as a deduction.
Casualty Loss Proof
For a casualty loss, you should be able to show all the following:
- The type of casualty (car accident, fire, storm, etc.) and when it occurred
- That the loss was a direct result of the casualty
- That you were the owner of the property, or if you leased the property from someone else, that you were contractually liable to the owner for the damage.
- Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery.
Theft Loss Proof
For a theft loss, you should be able to show all the following:
- When you discovered that your property was missing
- That your property was stolen
- That you were the owner of the property
- Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery
Tax Preparation Fees
You can usually deduct tax preparation fees in the year you pay them. Thus, on your 2015 return, you can deduct fees paid in 2015 for preparing your 2014 return. These fees include the cost of tax preparation software programs and tax publications. They also include any fee you paid for electronic filing of your return. However, if you paid your tax by credit, you cannot deduct the convenience fee you were charged.
Safe Deposit Box Rent
You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities.
You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.
You can also deduct legal expenses that are:
- Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business,
- For tax advice related to divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or
- To collect taxable alimony
Investment Fees and Expenses
You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income.
If you use part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home.
You can claim this deduction for the business use as part of your home only if you use that home regularly and exclusively:
- As your principal place of business for any trade or business,
- As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or
- In the case of a separate structure not attached to your home, in connection with your trade or business.
The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job.
Job Search Expenses
You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:
- You are looking for a job in a new occupation,
- There was a substantial break between the ending of your last job and your looking for a new one, or
- You are looking for a job for the first time.
Travel and Transportation Expenses
If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend in looking for a work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area.
You can choose to use the standard mileage rate to figure your car expenses. The rate for business use of a vehicle is 56 ½ cents per mile.
Tools Used in Your Work
Generally, you can deduct amounts you spend for tools used in your work if tools wear out and are thrown away within 1 year from the date of purchase. You can depreciate the cost of tools that have a useful life substantially beyond the tax year.
Union Dues and Expenses
You can deduct dues and initiation fees you pay for union membership.
You can also deduct assessments for benefit payments to unemployed union members. However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions.
You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities.
Work Clothes and Uniforms
You can deduct the cost and upkeep of work clothes if the following two requirements are met.
- You must wear them as a condition of your employment.
- The clothes are not suitable for everyday wear.
It is not enough that you wear distinctive clothing. The clothing must be specifically required by your employer. Nor is it enough that you do not, in fact, wear your work clothes away from work. The clothing must not be suitable for taking the place of your regular clothing.
Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc.).
Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.
However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of the uniform. Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible.
You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves.
Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers.
You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. However, if you are an armed forces reservist, you can deduct the un-reimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive.
You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school.
Gambling Losses Up to the Amount of Gambling Winnings
You must report the full amount of your gambling winnings for the year on Form 1040. You deduct your gambling losses for the year on Schedule A (Form 1040). You cannot deduct gambling losses that are more than your winnings.
You cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses.
Diary of Winnings and Losses
You must keep an accurate diary or similar record of your losses and winnings. Your diary should contain at least the following information.
- The date and type of your specific wager or wagering activity
- The name and address or location of the gambling establishment
- The names of other persons present with you at the gambling establishment
- The amount(s) you won or lost
Your federal tax filing status is based on your marital and family situation. It is an important factor in determining whether you must file a return, your standard deduction, and your correct amount of tax. Your filing status is also used to help determine your eligibility for certain deductions and credits.
Your marital status on the last day of the year determines your status for the entire year. If more than one filing status applies to you, you may choose the one that gives you the lowest tax obligation.
There are Five Filing Status Options:
Generally, if you are unmarried, divorced, or legally separated according to your state law, your filing status is Single
- Married Filing Jointly
If you are married, you and your spouse may file a joint return. If your spouse died during the year and you did not remarry, you may still file a joint return with that spouse for the year of death.
- Married Filing Separately
Married taxpayers may elect to file separate returns.
- Head of Household
You generally must be unmarried and you must have paid more than half the cost of maintaining a home for you and a qualifying person.
- Qualifying Widow(er) with Dependent Child
If your spouse died during the tax year, you have a qualifying child, and meet certain other conditions; you may be able to choose this filing status.
Filing Status for Same-Sex Married Couples
If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or the married filing separately filing status on your return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage.