Liberty Tax® Income Tax Tips for filing a return

  • Follow these Income Tax Tips and save:  



    There’s tax relief for homeowners who have incurred property damages from corrosive imported drywall installed between 2001 and 2009. They may deduct the all the expenses paid for damages to wiring and replacing affected appliances as casualty losses in the year that they were paid if they haven’t filed a claim. If the homeowner has a pending insurance claim for the damages, they may claim 75% of the loss. After the claim is resolved, reimbursements may result in income that may be taxable. TOP 



    For eligible property placed in service during 2012 you can claim a credit of up to $500 of the cost of certain energy efficient property. The residential energy credit may offer a tax break on a 2012 return if all installation is done and/or work was completed in 2012. Residential energy credits apply to homes, houseboats, mobile homes, condominium, and qualifying manufactured homes. The 2012 credit must be reduced by the amount of any residential energy credit taken after 2005. TOP 



    Here’s a tax tip from Liberty Tax Service. Homeowners experiencing “short sales” and foreclosures will get a break for “debt-forgiveness” tax consequences. Instead of treating cancellation of debt as taxable income on the foreclosure of a principle home, no taxes will be levied on discharges of indebtedness of up to $2 million dollars for married taxpayers filing jointly and of up to $1 million dollars for a married taxpayer filing a separate return through tax year 2013. TOP 



    Here’s a tax-saving tip from Liberty Tax. Home ownership is often the tipping point to itemizing deductions and deducting certain qualified expenses, rather than taking the standard deduction amount. When deducting mortgage interest, you may deduct it on your primary home, a second mortgage, points, a home equity loan, or line of credit secured by your home. Mortgage insurance premiums are deductible as interest through December 31, 2013.You can claim a boat or RV as a first or second home if it has facilities for sleeping and cooking, and has a toilet. Married taxpayers filing jointly may deduct up to the fair market value of your home or $1 million, whichever is less. Single taxpayers may deduct up to the fair market value of your home of $50,000, whichever is less. Interest paid to refinance is deductible. By January 31 of each year, homeowners should receive Form 1098, Mortgage Interest Statement.TOP 



    Here’s a tax tip from Liberty Tax Service.  The maximum amount of income that a taxpayer can earn and still get the Earned Income Tax Credit has increased.  The taxpayer may be able to take the credit if:  

    • They have three or more qualifying children and earn less than $45,060 ($50,270 if married filing jointly). 
    • They have two qualifying children and earn less than $41.952 ($47,162 if married filing jointly). 
    • They have one qualifying child and earn less than $36,920 ($42,130 if married filing jointly). 
    • They have no qualifying children and earn less than $13,980 ($19,190 if married filing jointly). TOP 



    Here’s a tax tip from Liberty Tax Service.  The maximum credit amounts for this year are:  

    • $5,891 with three or more qualifying children  
    • $5,236 with two qualifying children  
    • $3,169 with one qualifying child  
    • $75 with no qualifying children  

    Investment income must be $3,200 or less for the year. TOP 



    Here’s a tax tip from Liberty Tax Service.  If you serve in a combat zone, you can choose whether or not to claim it as earned income to figure your eligibility for the earned income.  This decision can increase or decrease the amount of the Earned Income Credit received.   The amount of combat pay is reported on box 12 of Form W-2.  For those in the military, combat pay, the Basic Allowance for Housing, and the Basic Allowance for Subsistence are considered non-taxable income..TOP 



    Here’s a tax tip from Liberty Tax Service. More people may be eligible to claim the child tax credit. The additional child tax credit on Schedule 8812 is refundable to the extent of 15% of the taxpayer’s earned income in excess of $3,000. A qualifying child must be under 17, a son, daughter, stepchild, eligible foster child who is a dependent, brother, sister, stepbrother, stepsister, or descendent of one of them (including grandchild, niece and nephew). This credit is nonrefundable, and can only reduce the taxpayer's income tax.TOP 



    Here’s a tax tip from Liberty Tax Service. A refundable additional child tax credit may be available to those who qualify and have not used up the available amount. A military taxpayer’s nontaxable combat pay is added to the earned income which may give a larger credit. The percentage used to determine the credit is 15% of the earned income amount over $3,000. TOP 


    Here’s a tax tip from Liberty Tax Service. Children with investment income can be taxed at their parents’ tax rate. A child who is 18 and whose investment income is not more than half of their support and a child who are college students under age 24 and whose earned income is not more than half of the child’s support will also have their investment income taxed at their parents’ rate. Children in these categories can receive no more than $1,900 in investment income before they are taxed.TOP 


    Here’s a tax tip from Liberty Tax Service. The maximum adoption credit is $12,650 and the adoption credit is refundable in 2012. This is also the maximum exclusion from income under an employer’s adoption assistance program. The full credit will be allowed for adopting a special needs child, regardless of whether the taxpayer has qualifying expenses. Taxpayers who adopt and file for their “qualified adoption expenses” must file a paper return with Form 8839, Qualified Adoption Expenses, and required documentation.TOP 



    The American Opportunity Tax Credit will be available through 2017. Taxpayers may deduct qualified education expenses up to $2,500 per eligible student. Taxpayers may receive the credit of up to 100 percent of the first $2,000 in expenses, fees and tuition, and 25 percent of the next $2,000 education expenses. Unlike the Hope Credit, which could only be claimed for expenses during the first two years of a student's college education, can be claimed for the full four years. Qualified education expenses include tuition and related expenses. Additionally, the definition of "qualified education expenses" has been expanded to cover course materials, meaning taxpayers may include the costs of books, supplies and equipment needed for a class. The full credit will be available to single taxpayers whose adjusted gross income is $80,000 or less and married couples filing jointly, whose AGI is $160,000 or less.TOP 



    The tuition and fees deduction remains in effect for 2012 for higher education costs for yourself, your spouse, or a dependent. The tuition and fees deduction has some little known advantages over other deductible education expenses: The tuition and fees deduction can be taken for qualified education expenses connected to employment, without the taxpayer being required to itemize deductions. The costs of books, activity fees and supplies may also be deductible.TOP 


    The Lifetime Learning Credit may also benefit graduate students or those returning to school. The credit covers qualified tuition and related expenses for the taxpayer, his or her spouse and eligible dependents. 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.TOP 


    Here’s a tax tip from Liberty Tax Service. Taxpayers repaying a student loan (or education loan) may qualify to deduct up to $2,500 of their student loan interest as an adjustment to income. There are AGI limitations which determine deductibility. The credit may be phased out if your modified adjust gross income exceeds certain limits. For 2012, the phase-out levels are between $60,000 and $75,000 for single, head of household, and qualifying widow taxpayers, and between $125,000 and $155,000 for married filing jointly.TOP 


    Here’s a tax tip from Liberty Tax Service. Generally, you can depreciate the amount you spent for tools used in your work. Some of the other expenses you may deduct include union dues, job-related magazines and books, and other related business expenses. If your employer requires you to wear work clothes or uniforms that are not suitable for everyday wear, you may deduct the cost and upkeep. If you are taking classes related to your current job to improve your performance, these educational expenses may be deductible.TOP 


    Here’s a tax-saving tip from Liberty Tax Service. Cell phones issued by an employer are no longer considered “listed property” and depreciation documentation and extensive record keeping that was required is no longer necessary. If your employer requires you to use your personal cell phone for business purposes, reimbursements of these expenses are not taxable.TOP 


    Here’s a tax-saving tip from Liberty Tax Service. Careful tax planning year-round can pay off at tax time for small business owners. For 2012, small businesses can expense up to $500,000 of the first $2 million of business expenditures considered section 179 expenses. These include tangible property used for a business or trade such as computer software. New businesses can deduct up to $10,000 in start-up expenses on their first tax return in 2012. The new Small Business Health Care Tax Credit applies to small employers who pay at least half of employees’ premiums. The credit is 35% of premiums for tax years 2010 through 2013.TOP 


    Here’s a tax tip from Liberty Tax Service. A home office will qualify as the principal place of business if it is used exclusively and regularly by the taxpayer to conduct administrative or management activities of a trade or business. You may also deduct the square footage used to store inventory. There must be no other fixed location of the business where the taxpayer can conduct these activities. The area claimed can only be used for your business, and not at all for personal use. You may or may not be able to claim the entire amount. You can if your gross income from the business is equal or greater than your total business expenses.TOP 


    Here’s a tax tip from Liberty Tax Service. You can amend your tax return if you've filed, and later realize that you've omitted income, mad a mistake, or overlooked some deductions. You can amend your return by filing Form 1040X within 3 years after the date you filed your original return. You cannot change your filing status from married filing jointly to married filing separately after the due date of the original return.TOP 


    Here’s a tax tip from Liberty Tax Service. You can pay the taxes you owe in installments if you can’t pay the total to the IRS by the tax deadline. If you are not currently paying by an installment plan, complete Form 9465, Installment Agreement Request, and attach it to the front of the return. You should send as much of the payment as possible with the return in order to limit penalty and interest charges which will continue accumulating until the total amount due is paid off. Taxpayers who have already mailed or electronically filed their returns can mail Form 9465 to their appropriate IRS Service Center. An IRS representative will contact you to discuss the situation and arrange the payments.TOP