IRS Tax Information
A dependent must be either a "qualifying child" or a "qualifying relative." You are allowed one exemption for each person you can claim as a dependent.
Single, married filing jointly, married filing separately, head of householdall these and more explained.
Individual Retirement Arrangement (IRA)
No contributions are allowed to a traditional IRA in and after the year you turn age 70 1/2. At that age, there is a required minimum distribution (RMD) that must be withdrawn each year.
Life changes have tax consequences, from birth through death
During your lifetime, you may get a job, go to school, get married, start a business, change jobs, have children, send children to college, buy and/or sell a home, get divorced, contribute to a retirement plan, or draw money out of a retirement plan.
New Marriages - If you are married as of December 31st of a year, you are considered married for the whole year. Your filing status depends on your marital status.
Births - Your child born on December 31 is assumed, for tax purposes, to have lived with you the entire year. For each qualifying child, you can claim a dependent's exemption of $3,700.
Deaths - The same filing requirements that apply to individuals determine if a final income tax return must be filed for the decedent.
Divorce - If you are divorced or legally separated as of December 31, for tax purposes you are considered to be unmarried for the entire year.
College Attendance - The American Opportunity Credit is available again in 2013 for taxpayers claiming higher education costs including required course materials. The credit will allow the taxpayer to claim up to $2,500 of the cost of college tuition and related expenses. Forty percent of that credit will be refundable. The lifetime learning credit gives a credit of 20% of qualified educational expenses not exceeding $10,000, for a maximum credit of $2,000. Unlike the American Opportunity Credit, the Lifetime Learning Credit is available to graduate students and covers up to 20 percent of out-of-pocket expenses up to $10,000, for a maximum amount of $2,000.
New Job - If job expenses are incurred and not reimbursed by your employer, you may be able to claim them as employee business expenses.
Retirement - Pensions and annuities are generally taxable when distributed. You must start withdrawing from a traditional IRA by April 1 of the year following the year you reach age 70 1/2.
Owning A Home - Points paid when you purchase your home are generally deductible in that year. Mortgage interest and real estate taxes paid on your home are deductible.
Rental Income & Expenses - Owning rental property is often a good way to increase your net worth.
Taxable VS Nontaxable Income
Knowing how to report it properly helps reduce the tax liability.
Earned Income Credit
The Earned Income Credit (EIC) is a tax credit for low and middle income wage earners with and without children. The 2013 qualifying levels are:
*Three or more qualifying children and earn less than $43,998 ($49,078 if MFJ)
*Two qualifying children and earn less than $40,964 ($46,044 if MFJ)
*One qualifying child and earn less than $36,052 ($41,132 if MFJ)
*No qualifying child and earn less than $13,660 ($18,740 if MFJ)
How to Avoid Common Problems
Mathematical errors, forgetting to sign your return and more.
Mileage DeductionsKeep track of your deductible mileage on your vehicle and you could see big savings on your tax return. Remember that you MUST keep accurate records in order for the deductions to be allowed.
What Should You Bring To Your Tax Interview?
Personal information for each family member, income and tax information, deductions and credits.
Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions.
Avoid paying more tax than necessary. Your Liberty Tax professional will probe to make sure that you claim all the tax deductions that you are eligible to claim.
There's nothing as certain as an ever-changing tax code. Besides the usual increases in exemption amounts, standard deductions, and qualifying income levels for the earned income credit, there are several impactful changes for filing Tax Year 2013 returns.