End of Summer - Tax Credits for September & Education

Education tax credits can help offset the costs of higher education for yourself or a dependent. The Hope Credit and the Lifetime Learning Credit are two education credits available which may benefit you. Because they are credits rather than deductions, you may be able to subtract them in full, dollar for dollar, from your federal income tax.

The Hope Credit

• The credit applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs. After your first two years you are entitled to take the lifetime learning credit.
  
• It can be worth up to $1,800 ($3,600 if a student in a Midwestern disaster area) per eligible student, per year.
• You're allowed a credit of 100% of the first $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,200 ($2,400 if a student in a Midwestern disaster area).
• Each student must be enrolled at least half-time for at least one academic period which began during the year.
• The student must be free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year. Basically, no drug convictions.
  

The Lifetime Learning Credit

• The credit applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.
• If you qualify, your credit equals 20% (40% if a student in a Midwestern disaster area) of the first $10,000 of post-secondary tuition and fees you pay during the year, for a maximum credit of $2,000 ($4,000 if a student in a Midwestern disaster area) per tax return.

You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim either credit if you claim a tuition and fees deduction for the same student in the same year. To qualify for either credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit.

As with almost every good credit, These credits are phased out for Modified Adjusted Gross Income over $48,000 ($96,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $58,000 or more ($116,000 for married filing jointly). If the taxpayer is married, the credit may be claimed only on a joint return.

Talk with your NY Accountant come tax time so that you take full advantage of the tax savings these credits provide.

Hurricane Season - How to Claim a Casualty Loss

Top Ten Tips for Taxpayers Deducting Casualty and Theft Losses

People who find themselves the victim of a natural disaster or theft this summer should know the rules for deducting their casualty losses next year when they file their federal tax return. Generally, you may deduct losses to your home, household items and vehicles on your federal income tax return.

Here are ten things the IRS wants you to know about deducting casualty or theft losses.

You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement. You must reduce your loss by the amount of the reimbursement. I.E. Hurricane takes the roof off your home and the cost of the repairs EXCEEDS your insurance coverage, you have a deductible loss.

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 like a car accident, fire, earthquake, flood or vandalism.

If your property is not completely destroyed or if it is personal-use property, the amount of your casualty or theft loss is the lesser of the adjusted basis of your property, or the decrease in fair market value of your property as a result of the casualty or theft, reduced by any insurance or other reimbursement you receive or expect to receive.

If business or income-producing property, such as rental property, is completely destroyed, the amount of your loss is your adjusted basis in the property minus any salvage value, and minus any insurance or other reimbursement you receive or expect to receive.

To claim a casualty or theft loss, you must complete Form 4684, Casualties and Thefts, and attach it to your federal tax return. Generally, you may claim casualty or theft loss of personal use property only if you itemize deductions on Form 1040, Schedule A. However, you can deduct a 2008 or 2009 net disaster loss from a federally-declared disaster even if you do not itemize your deductions.

If the property was held by you for personal use, you must further reduce your loss by $100. This $100 reduction for losses of personal-use property applies to each casualty or theft event that occurred during the year other than 2009. For 2009, individuals must reduce their casualty and theft losses for personal-use property by $500 instead of $100. This $500 reduction for losses of personal-use property applies to each casualty or theft event.

The total of all your casualty and theft losses of personal-use property usually must be further reduced by 10 percent of your adjusted gross income. The 10 percent AGI limitation does not apply to net disaster losses resulting from federally declared disasters in 2008 and 2009. Also if you are a Madoff victim, there are special rules that apply.

In figuring your loss, do not consider the loss of future profits or income due to the casualty. Its a shame but tis true, if your work truck gets destroyed and you use it to earn a living. Your Casualty loss is limited to truck, not the income earning potential of the truck.

Casualty losses are normally deductible only in the year the casualty occurred. But if you have a deductible loss from a federally declared disaster you can choose to deduct that loss on your tax return for the previous year. If you have already filed your return for the preceding year, you can claim the loss on the previous year tax return by filing an amended return.

Update on First Time Home Buyer Credit

Credit for First Time Home Buyer
Credit for First Time Home BuyerKey PointsThere is a credit available to individuals who purchased their first home after April 8, 2008, and before December 1, 2009. So Hurry up the clock is ticking on this credit. This is an extension of the previous date of April 2009.

For homes purchased in 2008, you may be eligible for a credit of up to $7500, which is basically an interest free loan due and payable over the next 15 years in equal annual installments beginning in 2010.

For homes purchased in 2009, you may be eligible for a credit of $8000, the credit does not have to be paid back unless the home ceases to be the taxpayers primary residence during the three year period following the purchase date. The credit cannot be claimed before the closing date. You may amend your return if you have filed already in order to take the credit.

Taxpayers who have not owned another home at any time during the three years prior to the date of purchase are considered first time home buyers.The credit is claimed on a new form 5405.As with most credits, it is subject to income limitations.