May 18, 2013

Posts Comments

Should Your Claim Your Adult Children as Dependents on Your Tax Return

April 5, 2013 By

If you are a parent of adult-aged kids, then you must be wondering whether or not to claim them as dependents on your tax returns. The main objective of claiming tax deductions for dependent kids is to lower the overall cost of bringing up a family. The deductible amount varies but in 2011, taxpayers were allowed to claim $3,700 in exclusion for every eligible child. If you are a family falling in the 25% tax range, then you could save approximately $925 for every child.

Before making up your mind whether or not to claim a child as a dependent, there are a few factors that you have to consider. This shouldn’t however, be a problem, especially for the purposes of tax deductions, as it is always safer to claim your kids as dependents for as long as possible. In fact, tax experts argue that they can be claimed as dependents on your return forever unless of course, they earn a lot of money or you are barred by the law from claiming them. Consider the following factors to decide whether you qualify and if it is economically feasible to retain your kids as dependents.

Age Factor: Legally, any child aged 19 and below can be claimed as a dependent kid. If they go to college, the age limit is extended to 24. Even if they finally hit 24 years or older, get employed, but earn less than $3,700 annually, they can still be claimed as “qualifying relatives” where the parent saves more in taxes than the child.

Your Children’s Education: If you have a child in college, then you may find it beneficial to claim, since you are likely to realize better tax benefits like the $2,500 education credit plus tuition and fees deduction until they turn 24, get married, graduate with a bachelors degree, etc.

Medical Expenses: If you still have a child living under your roof, then you can deduct medical costs as itemized deductions. This includes out-of-pocket child care. Please note that your kids automatically qualify for your medical insurance benefits until they turn 26, whether they are claimed as dependents on tax returns or not. This is as per the Affordable Care Act.

You must consider these factors when filing your tax return and go for the option that makes the best tax sense.

Filed Under: Our Blogs Tagged With: , , , , , , , , ,

Some Tax Deductions for Pets You Need to Know

August 21, 2012 By

Americans have a way with pets, exhibited by the passionate uproar whenever an animal is mistreated and the many animal protections campaigns. According to the American Pet Products Association (APPA) National Pet Owners Survey, 62% of U.S households own at least one pet, which amounts to a whopping 72.9 million homes in total. There are 78 million dogs and 86 million cats in American homes.

The APPA survey further reveals that the pet owners spent close to $51 billion on their animals alone in 2011. This figure is expected to shoot to $53 billion in 2012, and it is not likely to drop any time soon. As a result of the Americans’ love for pets, pet supply stores are cropping up in every corner of the country to cater for the overwhelming demand.

Congress has not been left behind in trying to protect American pet owners through the Humanity and Pets Partnered Through the Years, or HAPPY Act. Had this act been enacted, pet owners would be allowed to deduct up to $3,500 for pet care alone. It is unfortunate for pet owners that this act was shot down, to the disappointment of many.

The IRS has always maintained that pet owners have no ground to claim their pets as dependents. However, there are cases when pet-related expenses can be deducted.

Pets as Medical Deductions: Pet owners can include as medical expenses the cost of buying, training, and keeping a service or guide dog or other pet to help the visual or hearing impaired persons, or people with other disabilities. These costs include food, grooming, veterinary, health, vitality, and any other maintenance costs to ensure that the animal performs its duties well.

Pets as a Business Cost: If you run a business and use the services of a pet at work, some of the pet’s expenses can be claimed. Some dogs like German shepherds are used as guard dogs and if you can prove that it protects your inventory, the IRS can accept to write off the  pet’s food expenses.

Pets as a Moving Cost: The expenses incurred when shipping the household pets to your new residence can also be deducted.

These are the three main viable reasons that you could use to claim a refund from the IRS. Please talk to your tax pro for more ways through which you can enjoy some pet-related tax breaks.

Filed Under: Our Blogs Tagged With: , , , , , , ,

Exemptions and Dependents to Lower your IRS Tax Payments

March 29, 2012 By

There are tax rules in existence, which in one way or another, affect every individual filing for income tax return, as stipulated by the federal laws, although there is great difference in filing individual income tax returns. These rules clearly state cases of exemptions and dependents. IRS tax payments can be greatly lowered if individuals seek to exploit the exemptions and number of dependents when filing their tax returns. Some of the facts that most taxpayers are not aware of concerning exemptions and dependents include:

        i.            An individual’s taxable income can be reduced by use of exemptions. Generally, two categories of exemptions apply. One, dependents’ exemptions, and two, personal exemptions. Each of these exemptions, when well used, can reduce an individual’s tax return by $3,700.

      ii.            Dependents’ exemptions. A qualifying child or relative is a dependent. A person can secure exemption on all their dependents. The only requirement for this rule is to list the dependent’s Social Security number.

    iii.            As a dependent you might not claim for an exemption. A personal is not eligible to claim his/her personal exemption when filing personal tax returns when another person, say a parent, has already claimed them as dependents.

    iv.            A spouse is not a dependent.When filing a joint tax return, a taxpayer is qualified to claim an exemption for himself/herself and one for the spouse as well. But when filing separately, one can only claim an exemption for their spouse if they have no net income, are not another taxpayer’s dependents and they are not filing a joint tax return.

      v.            Not everyone qualifies to be a dependent. Generally, persons who can be claimed as dependents must be citizens of the U.S., resident aliens in the U.S., or resident of Mexico or Canada for some portion of a year. Luckily, there is in place an exception for adopted children. Also, a person is not allowed to claim a person who is married as their dependent if such a person files a joint tax return.

    vi.            A person may be required to file their personal tax return despite being dependent of another person. A number of factors are considered before one qualifies to file tax returns. Some of these factors include amount of income, one’s marital status and taxes owed.

Additional and helpful information can be obtained on IRS Publication 501, which is available on the official IRS website. This publication explains more on dependents and exemptions. Also, one can get help by calling 800-TAX-FORM (800-829-3676), or by using the ITA tool on the IRS website.

Filed Under: Our Blogs Tagged With: , , , , , , , ,