Around tax time, it's common to hear phrases such as "tax deduction" or "tax credit" being used interchangeably. While it can be easy to assume that tax deductions are tax credits are the same, they're actually different and they affect your tax liability in different ways. Which one is best to use on your tax return? Here's a primer on the difference between a tax deduction and a tax credit.
When an individual or a family considers adopting a child, one of the biggest concerns is the high cost of the adoption process. Prospective parents often have to spend large amounts of money before they ever see their potential child. In addition, they may be left with unpaid bills, even if the adoption is ultimately unsuccessful. The federal government initially approved an Adoption Tax Credit in the mid-1990s that would ease the financial burden on an adopting family. Taxpayers who take advantage of the provision can reduce their tax liability for the year.
Are you getting close to retirement? If so, you're probably excited about leaving the workforce behind and starting the next chapter of your life. Planning for your retirement can help you make sure that this new era is exactly what you're hoping it will be. Good retirement planning includes considering tax issues and deciding when to begin receiving your pension. Here's a quick review of what you need to know about planning your taxes for retirement.
Many taxpayers use their home purchases as a way to
save money on their tax liability for the year. However, the IRS also allows taxpayers to buy properties for investment real estate and use the eligible deductions to reduce their tax bills. Several of the same home deductions that apply to residences also apply to investment real estate properties.
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The Mortgage Forgiveness Debt Relief Act, which was originally passed in 2007, was recently extended through the 2012 tax year. This law provides a substantial tax break for homeowners who lost homes to foreclosures by allowing them to avoid taxation on their cancelation of debt. The federal government extended the Mortgage Forgiveness Debt Relief Act using the Emergency Economic Stabilization Act in an attempt to revamp the lagging U.S. economy.
Taxpayers who deduct gifts on their tax returns often wind up getting audited, but that doesn't mean that the IRS disallows all deductions for gifts. In some instances, taxpayers can receive gifts without paying taxes or give gifts and claim a deduction. The key, however, is knowing the IRS rules for tax-free gifts.
There are three basic types of traditional 401(k) plans available that can save you money on your tax return this year. Here's an overview of how your 401(k) plan can benefit your tax return.
Many of the current income tax credits and deductions were scheduled to expire at the end of 2012, but the federal government has decided to extend some of these credits into 2013 or longer. The credit extension is good news for several taxpayers, including those with children, those who are employed as educators, and those who take retirement distributions. Here's a look at a few of the tax credits that been extended into 2013.
Some taxpayers may feel that once they stop earning a regular wage that won't need to file an income tax return. However, there are some tax situations that face older individuals that may still require them to file a federal tax return. The key is understanding the tax filing requirements for retirees so that you can make sure you comply with the tax law.
Do you work out of your home? If so, you may be eligible for a home office deduction on your federal income tax return. In past years, the IRS tended to audit taxpayers who claimed a home office deduction at a higher rate than other individuals, but the agency has since reduced the use of this practice. If you qualify for a home office deduction, now is the time to start claiming your rightful tax break! Here is a primer on claiming a home office deduction.
