Tax tips

Tax tips

Posted: Wednesday, February 16, 2011 6:01 pm

Homeowner Tax Breaks

If you own a home, be sure you’re taking advantage of all the tax breaks available to you.

Even if you don’t itemize deductions, you can:

• Deduct at least part of your property taxes. Taxpayers can claim an additional standard deduction based on state or local real-estate taxes paid in 2010. Taxes paid on foreign or business property do not count. The maximum deduction is $500 for individuals or $1,000 for joint filers.

• Possibly qualify for a Homebuyer Credit. Those who bought a main home in 2010 may qualify for a credit of up to $8,000.  Buyers who have not owned a main home in the three years prior to the purchase get the highest credit.  Others who have owned a home may still qualify for up to $6,500 if they purchased another home. Homebuyers must have had a binding contract by April 30, 2010, and the purchase must have been completed by Sept. 30. 

Expenses that itemizers can usually deduct include:

* Mortgage interest paid

* Real estate taxes paid

* Points paid at closing

* Points paid when refinancing (must be amortized)

* Qualified mortgage insurance premiums paid

And don’t forget possible tax credits for energy-saving improvements made to your home. For 2009 and 2010 combined, a maximum tax credit of $1,500 is available if you bought and installed insulation or energy-efficient windows, exterior doors, water heaters, heating and cooling systems and even certain types of roofs. A tax credit is also available for solar, geothermal and wind energy equipment. See details at www.energystar.gov. 

 

Dependents and 

Exemptions

Some tax rules affect every person who may have to file a federal income tax return – these rules include dependents and exemptions. Here are six important facts the IRS wants you to know about dependents and exemptions that will help you file your 2010 tax return. 

1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,650 on your 2010 tax return. 

2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.

3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the social security number of any dependent for whom you claim an exemption.

4. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status, any special taxes you owe and any advance Earned Income Tax Credit payments you received.

5. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own tax return.

6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent. 

For more information on exemptions, dependents and whether you or your dependent needs to file a tax return, see IRS Publication 501. The publication is available at http://www.irs.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

wcp 2/15/11

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