4 tax breaks for parents – going going…

“Many lower-income parents could see their tax bills jump by thousands of dollars next year if nothing is done to stop a series of tax breaks from expiring January 1.

Unless Congress takes action before the end of the year, four important credits for families — The Child Tax Credit, Earned Income Tax Credit, Child and Dependent Care Credit and the American Opportunity Credit — will revert back to previous levels.

If this happens, many families will be worse off by hundreds — or even thousands…”  story

ps, you might want to go to college asap

The Tax Side of the Fiscal Cliff

You already saw on the news last night the head of the International Monetary Fund note that the US is at the edge of a “Fiscal Cliff” and pulling down the world economy. You also heard that the average American w/ earnings of about $40k will pay $2000 MORE in taxes for 2013.  All this will bring … according the the IMF speaker, a new wave of great recession: “2%+ and 2%- = 0%, the math speaks”

This may be a good year to get out and vote folks.

follow the story

Michigan Tax Law changes 1/1/2012

INCOME TAX CHANGES FOR INDIVIDUALS AND TRUSTS EFFECTIVE TAX YEAR 2012 (FOR RETURNS FILED IN 2013)

New legislation does not apply to returns thru April 2012, but returns that are due in April 2013.

Be aware of the following:

  • Tax rates
    • The rate remains at 4.35 % for tax year 2012.
    • For 2013 and each tax year thereafter the rate is 4.25%.
  • Personal exemption set at $3,700 (same as under current law) and will be indexed to inflation beginning in 2013.
    • Repeals special exemptions for seniors. & unemployment compensation greater than 50% of adjusted gross income (AGI).
    • Special exemption for disabled and exemption for disabled veterans – unchanged.
    • Phases out certain pension and retirement income subtractions based on date of birth.
  • Repeals
    • certain miscellaneous deductions (political donations; prizes won in state-regulated bingo, raffle, or charity games; charitable gifts from retirement plans).
    • the $600 deduction for children 18 and under.
    • Non-refundable Credits: for city income taxes, public contributions, credit for contributions to homeless shelters, food banks, and community foundations, automobile donations, college tuition and fees, reduces the Earned Income Tax Credit from 20% to 6%, excess adoption expense credit, stillbirth credit.
  • Changes the homestead property tax credit as follows:
    • Household income is replaced by total household resources which excludes losses from business, rentals and royalties and also excludes net operating losses.
    • Available only for homes with taxable value of less than $135,000.
    • For senior claimants: Full credit of 100% if total household resources are $21,000 or less and reduced by 4% for each additional $1,000 in total household resources until $30,000 is reached. For total household resources of $30,000 to $41,000 senior claimants receive 60% of the credit.
    • All other claimants are eligible for 60% of the tax credit. Credit phase out begins at $41,000 of total household resources and is reduced by 10% for each $1,000 increase. Complete phase-out at $50,000.
    • Alternative credit for eligible service person/veteran is still available.

Home Office refresher

Many folks work from their homes.

If the office is qualified, you may deduct up to $24,000 for the cost of computers as well as a share of heating, cooling, and maintenance expenses of the home. To qualify, the home office must be an area used exclusively for business activity, and it must be the principal location used to conduct business or meet with customers.

The IRS is very strict in granting the home office deduction and has disallowed the deduction when it determined that a taxpayer kept personal correspondence in the same area used for the business.

If you are furnished another office you are not allowed to take home-office deductions. Review IRS Publication 587.