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Category: Tax Deductions and Credits

Deductions and credits may be similar but they are far from identical when it comes to your tax return. A tax deduction is a qualifying expense that decreases your taxable income. On the other hand, tax credits allow taxpayers to reduce their tax due to the IRS, dollar-for-dollar. You subtract the amount that the credit is worth from your tax liabilities. If you had to compare the two, a tax credit is more valuable on your tax return. Want to learn more about different credits you are eligible for or tax expenses you can claim? PriorTax tells you about expenses you can claim.

Archive for the ‘Tax Deductions and Credits’ Category

Are My Student Loans Tax Deductible?

Posted by admin on September 25, 2014
Last modified: October 6, 2016

Let’s face it- paying back student loans is painful. At least you’ll be able to deduct the interest paid on the loans!

College is great. However, the fairy tale ends six months after graduation, when it’s time to start making payments on your student loans.

The good news is  this; when filing your taxes, you can deduct the amount you paid in interest on your student loans!

Who is Eligible to Deduct Student Loan Interest?

There are certain limitations on who can deduct interest paid on students loans. In other words, you can deduct student loan interest if;

  • your filing status is NOT married filing separately 
  • you paid interest on a qualified student loan during the tax year
  • you are legally obligated to pay interest on your qualified student loan
  • your modified adjusted gross income falls below the IRS threshold (for single filers this amount is $60,000)
  • you and your spouse (if filing jointly) cannot be claimed as dependents on someone else’s tax return (more…)

How to Claim Home Office Deduction on 2013 Taxes

Posted by admin on March 11, 2014
Last modified: October 6, 2016

Have a home-based business? In the past, claiming a home office deduction was time consuming, annoying and complicated. Not anymore!

Thanks to the new IRS home office deduction, you can easily deduct up to $1,500 on your 2013 tax return when filing your home based business taxes. If you need to file taxes for prior years or for 2013 taxes, PriorTax has made claiming deductions simple for each tax year dating back to 2005.

How Much Can I Deduct for the 2013 Home Office Deduction?

In previous years, millions of taxpayers claimed home business tax deductions. In fact, according to the IRS, roughly $10 billion of home office deductions were claimed by 3.3 million filers for 2011. Annually, a cumulative 1.6 million unnecessary hours were spent on the paperwork, record keeping, etc. associated with claiming a home office deduction.

To help small business owners save time, the IRS decided to incorporate an easier option for claiming home office costs. Starting this year, the IRS incorporated an easy-to-calculate home office deduction. That means, on your 2013 tax return, you can deduct $5 for each square foot of your home office, up to 300 square feet.

Have a home office of 150 square feet? You’re home office deduction will be $750. Is your home office a spacious 600 feet? Unfortunately, your will be capped at $1500. (more…)

Is Student Loan Interest Tax Deductible?

Posted by admin on February 21, 2014
Last modified: December 21, 2016

If you’re among the 70% of college graduates, the experience abruptly ended upon paying your first student loan payment. 

Not only did the world slam you with the pressure to find a job, get your own apartment and pay student loans, but the student loan balance seems to carry some added weight; interest. Well, if you are one of the many Americans paying student loans, there is a bit of good news- when filing your taxes, you can take a student loan interest deduction.

How Much Can I Deduct in Student Loan Interest?

You can deduct up $2500 of interest you paid towards a student loan during the tax year. If you are eligible to claim the student loan interest deduction, you’ll be happy to know that it’s an above the line deduction. That means you aren’t required to itemize your deductions in order to claim the student loan deduction.

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Should I Itemize My Deductions?

Posted by admin on December 12, 2013
Last modified: October 6, 2016

Should I Itemize My Deductions Instead of Taking the Standard Deduction?

While filing your taxes, you can claim the standard deduction. This standard deduction varies on your filing status and allows you a deduction even if you haven’t saved any receipts over the tax year. Although most taxpayers take the standard deduction, there are some that itemize deductions and in return reduce more of their taxable income and able to claim a larger deduction.

If you’re wondering if itemizing your deductions is for you, you should first determine if your itemized deductions total to a number larger than the standard deduction amount. If you are filing taxes for prior years or the current year, you must save all receipts that support your itemized deductions.

What is an  Itemized Deduction?

Itemized deduction creates a decrease in a  taxpayer’s federal taxable adjusted gross income. In other words, itemized deductions turn taxable income into non-taxable income and ultimately reduce taxable income.

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A Holiday Carol to Believe; $1000 Child Tax Credit You Can Receive.

Posted by admin on December 2, 2013
Last modified: October 6, 2016

A Holiday Child Tax Credit Carol For All! 

 

Christmas day is soon and Hanukkah is now here,

That means the dreaded Tax Season is getting near.

Before filing, there are some things you should know,

So we made a carol to make it less tedious and slow!

 

There is a tax credit you may not believe,

A $1000 per child, which you can receive!

In 2012 the child tax credit was set to expire,

But things changed when down to the wire.

In 2013, Obama saw the eyes of parents fill with tears,

So on the third of January, it was extended for five years.

  (more…)

Can I Deduct Continuing Education When I Claim the Lifetime Learning Credit?

Posted by admin on April 11, 2013
Last modified: April 11, 2013

The IRS does not allow you to claim both a credit and a deduction for the same educational expenses, so you have to choose whichever gives you the greatest benefit

There are several different tax benefits available to students to help ease the cost of higher education. However the IRS does not allow more than one of these benefits to be claimed for any one student for the same expenses.

The Lifetime Learning Credit is one of two tax credits for higher education that can reduce the amount of taxes you owe. It allows you to claim a credit of up to $2,000 for qualified education expenses. The other credit is the American Opportunity Credit.

Each student can only claim one of the credits. You cannot claim the Lifetime Learning Credit if you claim the American Opportunity Credit for the same student and vice versa.

In addition to the credits there is also a Tuition and Fees Deduction which allows you to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependents. It can reduce the amount of your income that’s subject to tax by up to $4,000. (more…)

New York State Child and Dependent Care Tax Credit

Posted by admin on February 27, 2013
Last modified: December 22, 2016

Claim a valuable New York State credit in addition to the federal one

New Yorkers will be happy to learn that they can get a valuable credit on their state taxes for money they spent to take care of their kids and other dependents.

You can claim New York’s child and dependent care tax credit if you are eligible to claim the federal child and dependent care credit. You don’t actually have to claim the federal credit in order to get the NYS credit, you just have to be eligible for it.

The New York State credit amounts to 20-110% of your federal credit. Exactly how much you’ll get depends on your New York AGI.

New York City even has its own child and dependent care credit. You might be able to claim if you’re a resident of the city. This credit could amount to up to 75% of the New York State credit. (more…)

What Credits and Deductions Am I Missing on My 2011 Tax Return?

Posted by admin on February 7, 2013
Last modified: December 22, 2016

You can still get a refund from 2011 with the help of these credits and deductions

With the 2013 tax season in full swing, everyone’s worried about 2012 taxes. But don’t forget about 2011 taxes, especially if you forgot about them last year!

Did you know you could still get a refund from 2011? That’s right. Think of how wonderful this month would be if you got back two refunds instead of one.

The only way to get your maximum 2011 refund is with the help of credits and deductions. But with the tax code changing – often dramatically – from year to year, they can be hard to keep track of. Here are the most important credits and deductions you need to worry about for 2011. (more…)

How Do You Deduct Student Loan Interest?

Posted by admin on October 24, 2012
Last modified: December 21, 2016

The student loan interest deduction could result in fewer taxes, but you have to meet the requirements

All of you beleaguered underemployed college grads will be relieved to know that you can deduct student loan interest on your taxes.

But, in order to do so, you must qualify according to all the rules and regulations laid down by the IRS.

Who can take the deduction

You can only deduct student loan interest if

  • you paid interest on a qualified student loan during the tax year
  • you are legally obligated to pay interest on a qualified student loan
  • your filing status is not married filing separately
  • you and your spouse, if married filing jointly, cannot be claimed as dependents on someone else’s return
  • your modified AGI (adjusted gross income) is less than the limits set every year (see below) (more…)

Deducting State Sales Tax

Posted by admin on September 20, 2012
Last modified: August 7, 2013

The state sales tax deduction was extended in 2010, but may not be available for 2012

One of the many deductions built into our tax code is the ability to deduct state and local income taxes. Some states, however, don’t have an income tax. They fill their coffers with a large sales tax instead. To make it fair to people in these states, Congress introduced the ability to deduct state and local sales taxes instead.

You can deduct state and local income taxes or state and local sales taxes, but not both.

Generally, if you live in a state that has income tax, it’s more beneficial to deduct that. And if you live in a state without income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming, just for the record) it makes sense to deduct sales tax instead. And even if you do live in a state with income tax, it might make sense to deduct sales tax if you bought a particularly expensive item during the tax year.

If you do deduct sales tax, you can either deduct the actual amount of sales tax you paid, or a general amount that the IRS calculates. Let’s unpack these two options a little more. (more…)