Tax Credit

Tax Benefits For Education Part 4

This is the fourth part of our multi-part series of blogs on tax benefits for education. Any present or former student should utilize the knowledge, experience and expertise of the tax professionals at the Thorgood Law Firm to ensure that they take advantage all the credits and deductions that the law allows for students of higher education.

Tax credits, deductions and savings plans offer taxpayers ways to reduce their expenses for higher education.

  • A tax credit may reduce the amount of potential income tax.
  • A deduction reduces the amount of income that is subject to tax, thus reducing the amount of tax paid.

Tax Benefits For Education Part 2

This is the second part of our multi-part blog on tax benefits for education. Any present or former (or future) student should utilize the knowledge, experience and expertise of the tax professionals at the Thorgood Law Firm to ensure that they take advantage all the credits and deductions that the law allows for students of higher education.

Tax credits, deductions and savings plans offer taxpayers ways to reduce their expenses for higher education.

  • A tax credit may reduce the amount of potential income tax.
  • A deduction reduces the amount of income that is subject to tax, thus reducing the amount of tax paid.

Tax Benefits For Education Part 1

This is the first part of our multi-part blog on tax benefits for education. Any present or former (or future) student should utilize the knowledge, experience and expertise of the tax professionals at the Thorgood Law Firm to ensure that they take full advantage all the credits and deductions that the law allows for students of higher education.

Tax credits, deductions and savings plans offer taxpayers ways to reduce their expenses for higher education.

  • A tax credit may reduce the amount of potential income tax.
  • A deduction reduces the amount of income that is subject to tax, thus reducing the amount of tax paid.

Foreign Tax Credit For Individuals

Federal tax law provides the foreign tax credit to relieve taxpayers of the double tax burden imposed when their foreign income is taxed by both the United States and the foreign country where their income originated. Usually, if the foreign tax rate is higher than the U.S. tax rate, there will be no resulting U.S. tax on this foreign income. If the foreign tax rate is lower than the U.S. tax rate, the U.S. tax on the foreign income will be the difference between the two tax rates. Keep in mind that the foreign tax credit reduces U.S. taxes on foreign source income, but never reduces U.S. taxes on U.S. source income.

The Most Overlooked Tax Deductions, Part 2

Many taxpayers overlook the long list of deductions that they may take when completing and filing their tax returns. The IRS has estimated that millions of taxpayers overpay their taxes each year because they fail to avail themselves of all of the possible deductions. Here is the second part of our multi-part blog on the most overlooked tax deductions:

 INVESTMENT RELATED DEDUCTIONS

Amortizing Bond Premiums

The IRS offers assistance for taxpayers who purchase taxable bonds for more than face value. The purpose of such a purchase is to capture a yield higher than any offered by current market rates. Down the road, the IRS will tax the extra interest that this higher yield produces.

Tax Issues for new Widows and Widowers

It’s a traumatic experience to lose a spouse. While there is little that can be done to replace this physical and emotional loss, the Tax Code provides some relief for newly widowed taxpayers. Here is a summary of some of the tax breaks for the newly widowed:

Filing Status

Tax Breaks For Small Businesses

The US government defines a small business as one with sales of $7 million to $25 million a year and up to 1,000 employees. There are more than a few tax breaks available for small businesses and many have been extended for 2016. Some notable tax extenders include I.R.C. § 179 and bonus depreciation as well as tax credits for research and development, work opportunity, and energy production.

*I.R.C. §179 & Bonus Depreciation
Two important tax breaks for small business have been extended: I.R.C. § 179 and bonus depreciation. I.R.C. § 179 allows businesses to deduct the full price of any qualifying equipment or software purchased or leased during the year. The tax-extension bill makes permanent the $500,000 maximum deduction for new and used equipment that was purchased or leased in 2015. Bonus depreciation, which was extended through 2017, allows business owners to depreciate 50 percent of the cost of new equipment purchased in 2015. The two tax incentives can be used together.

Under I.R.C. § 179, taxpayers may claim certain business expenses in the year in which they were incurred rather than depreciating the costs over several tax years. The limit of $500,000 is double the previous limit and large enough that the average small business owner can write off most, if not all, of their equipment purchases in the year of the transaction.
The 50 percent bonus depreciation provision also was extended. After the full $500,000 is taken, exhausting the claim, an additional 50 percent of the adjusted basis of certain depreciable business property purchased and placed in service during 2015 may be deducted.

*Research and Development Credit
Originally enacted to act as an economic stimulus. Internal Revenue Code (IRC) § 41 enables a taxpayer to claim a tax credit for qualified research expenses paid or incurred by the taxpayer during the taxable year in carrying on any trade or business. The availability of this tax credit is established by the definition of qualified research expenses under I.R.C. § 41 and the regulations under I.R.C. § 174. New York State income tax law also permits an New York tax credit for qualified research expenses. An investment tax credit equal to 9% of qualified investment in R&D buildings and tangible personal property (the credit is 7% for personal income taxpayers).

*Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers who hire veterans and individuals from other target groups with significant barriers to employment. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit, and there are only a few simple steps to follow to apply for the WOTC. After the required certification is secured, qualifying employers can claim the tax credit as a general business credit against their income tax.

*Energy Tax Credits: Investment Tax Credit & Production Tax Credit
The Federal Production Tax Credit (PTC) and Investment Tax Credit (ITC) are incentives for
development and deployment of renewable energy technologies. The Production Tax Credit (PTC) reduces the federal income taxes of qualified tax-paying owners of renewable energy projects. The Investment Tax Credit (ITC) reduces federal income taxes for qualified tax-paying owners based on capital investment in renewable energy projects. The ITC is earned when the equipment is placed into service.

In December of 2015, the House and Senate agreed by significant margins to grant extensions to the 30 percent investment tax credit (ITC) for solar energy and the 2.3-cent-per-kilowatt-hour production tax credit (PTC) for wind power. Other technologies—including geothermal, marine energy and small hydropower—received one-year extensions to their 30 percent ITC under the joint spending and tax measures passed. New York State also offers a tax credit for biofuel production.

*Deductions
In addition to the tax breaks mentioned above, there are an abundance of good old-fashioned deductions that can help lower a small business owner’s tax liability, including:
• Automobile expenses related to business;
• Membership fees in trade organizations, professional groups and chambers of commerce;
• Classes, seminars, and other training in a profession;
• Banking, credit card and ATM fees incurred in business;
• Business travel and meal costs;
• Professional journals, newspapers and books necessary to conduct business.
• Internet and other telecommunication, including cellphone, charges for business use. Only the amount used for business may be deducted;
• If a small business operates from home, expenses relating to that portion of the residence that is work space should be deducted;
• State and local sales taxes.

If you are a small business owner and have questions about any credits or deductions that may reduce your business tax liability, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
Tax Breaks For Small Businesses

Children And Tax Credits: The Child Tax Credit

The popular $1,000-per-child tax credit was made a permanent part of the tax code by the American Taxpayer Relief Act. Depending upon a parent’s income, the Child Tax Credit is an important and useful tax credit that may be worth as much as $1,000 per qualifying child under the age of seventeen (17). A qualifying child for this credit is someone who meets the criteria of six tests: age, relationship, support, dependent, citizenship, and residence.

Age Test – To qualify, a child must have been age 16 or younger at the end of the applicable tax year.

Ways To Reduce Taxes In Retirement

Which retirement account, vehicle or venture is best? One thing is certain, diversity still carries the day when it comes to investments as different ones afford the most flexibility. The returns on different types of investments are treated differently by the tax code, which logically means that some get better tax treatment than others. Qualified dividends and capital gains, for example, are taxed at a lower rate than ordinary income, and thus are attractive investment options for retirement.

Child and Dependent Care Credit Explained (26 U.S.C. §21)

Federal courts have long held that expenses incurred by taxpayers for the care of dependents, such as a daycare or babysitting expense, while the taxpayer is away from home and at work, are not deductible under I.R.C. § 162(a). However, taxpayers who incur daycare expenses for their children or disabled adult dependents may be eligible for a federal tax credit of up to 35% percent of the cost of day care. To qualify for the child and dependent care credit, you must have a dependent child age 12 or younger, or a dependent of any age who cannot care for himself or herself. You may calculate your tax credit on IRS Form 2441.

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