TAX TIPS

TAX SAVING CREDIT

Child Care Credit
The Child Care Credit is given to a taxpayer who incurs child or dependent care expenses which enable the taxpayer to work. This credit is non-refundable, but can be for an amount as high as $xxxx.xx.

Educators Expense Credit
Professional K-12 educators can claim the Educators' Credit for out of pocket school related expenses. This credit is refundable and has no maximum income restrictions, but the maximum credit is only $xxx.

Foreign Tax Credit
The Foreign Tax Credit reduces US taxes by the amount of foreign taxes paid. This credit is non-refundable.

HOPE Education Credit
The Hope Credit is for qualified education expenses paid for the taxpayer, the taxpayer's spouse, and for dependents. This credit is non-refundable and can be for as much as $xxxx per child.

Lifetime Learning Education Credit
The Lifetime Learning Credit is for qualified education expenses paid for the taxpayer, the taxpayer's spouse, and for dependents. This credit is non-refundable and can be for as much as $xxxx per year.

Child Credit
Each qualifying child enables the taxpayer to claim the Child Tax Credit . This credit is partially refundable and is for an amount of $xxxx per child.

Earned Income Credit
Certain taxpayers whose income falls within specific limits can be eligible to claim the Earned Income Credit. This credit is fully refundable and can be for as much as $xxxx.

Retirement Saver's Credit
The Retirement Saver's Credit encourages retirement savings by allowing a credit based upon a percentage of amounts contributed to an IRA or retirement plan. This credit is non-refundable, but can be for an amount as high as $xxxxSONAL RESIDENCE TAX TIPS

• A tax-free gain of up to $250,000 (single) or $500,000 (married filing jointly) can be made on the sale of a primary residence.

• To qualify for the tax-free gain the owner of the property must live in the property for two out of the last five years.
  
• Where the "two out of five" criteria has not been met, a modified exclusion may still be taken under certain circumstances.
  
• The number of times a taxpayer can take advantage of this tax break is unlimited.
  A first-time home-buyer can use up to $10,000 from a Roth or regular IRA without paying the early withdrawal penalty.
  
• Interest on a home mortgage loan of up to $1,000,000 and interest on a home equity loan of up to $100,000 is tax deductible.
  
• Interest expense on a loan taken out for the construction of a new home can be deducted for the first 24 months of construction.
  
• Mortgage interest can be deducted on a second residence in addition to the taxpayer's primary residence.
  
• Recreational vehicles and boats can be considered a residence (or second residence) as long as they have cooking, toilet, and sleeping facilities.
  
• Property tax is a deductible expense for any real estate.
  

RENTAL REAL ESTATE TAX TIPS

• Income from property rented for 14 days or less, does not need to be reported.
  
• Expenses related to the rental property can be deducted.
  
• Expenses on a vacant rental property can be deducted as long as tenants are actively being sought.
  
• Depreciation should be taken on rental property. The IRS considers depreciation to have been taken on your rental whether or not you recorded the depreciation on your tax return. When the property is sold gain needs to be recognized to the extent of any depreciation.
  
• Rental losses can offset certain types of income. Up to $xxxxx of losses can be offset against other taxpayer income where the taxpayer's gross income is less than $xxxxx and the taxpayer is actively involved in the management of the rental property.
  
• An active real estate professional can take unlimited losses. A person is considered an active real estate professional if 750 hours and more than one half of his or her job or business related time is spent on real estate.
  
• Like-Kind Exchanges are an excellent way of deferring gains on the sale of a property. This technique can allow one property to be sold and exchanged for another without recognizing a gain on the property being sold
  
• Planning for the year-end can defer taxes for an entire year. Where possible the taxpayer should pay expenses before the end of the year and arrange for rents to be collected at the beginning of the next year.
  
• Non-resident aliens should always elect to treat their rental property as a business. This avoids the 30% flat withholding tax and allows deductions to be taken.

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Education Credit

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