The Federal Tax Credits Blog

Archive for the ‘Tax Credit vs Tax Deduction’ Category

Question: Should I take a large 401k deduction to lower taxes or pay what I owe with a credit card(vs living off it)?

Answer: Better whip out the credit card!

You can’t take any more 401(k) deductions for 2006. Unlike an IRA, there is no “grace period” for 401(k) deductions that would allow you to add anything to it after the end of the tax year. And you can’t just write a check and deposit it to your 401(k) plan. A 401(k) is a salary reduction plan, not a depository account.

You MIGHT be able to open an IRA and make a deductible contribution to it. You have until April 17, 2007 to do that. However since you are covered by an employer sponsored retirement plan there are income limits that may bar the deductiblity of any IRA contributions. For a single taxpayer, the deduction starts to fade when your AGI hits $50,000 and is gone when it hits $60,000.

Arsonists, whiskey are not tax deductible

By Edward J. Loughrey So, they put out pet food to attract wild cats. The cats came, ate the food and cured the rodent problem. The owners deducted the cost of the food and when it went to court, they ruled that it was a valid business expense. A taxpayer had to hire someone to watch his pet all day while he was at work.

Recovery Act Tax Benefits

Question: Itemize the same tax deduction when filing separately?

Hi, We filed for Divorce in january 2009. My Ex and I are planning to file married but separately. If he itemized his deductions, I understand that I need to do the same, right? and If he claims the support for the daycare expenses, tax credits and the mortgage, can I claim the same deductions on my tax return? he hs paying for the mortgage and I have been for the daycare. Knowing that we do not communicate, are there any laws or rules on WHO should claim what?

Thanks.

Answer: 1. The deduction can only be used once.
2. If you didn’t pay for it, you can’t deduct it.
3. The daycare expense goes to the parent the child was living with who also claims the child. (If you were separated, lived apart for most of the year, then you claim the daycare if the child lived with you.)

See IRS pub 504 for more comments.

Give to Food Bank of South Central Michigan, get a tax relief

Would you like to receive some tax relief and help get food to your neighbors in need at the same time? There’s still a few days left to make a monetary contribution to the Food Bank of South Central Michigan (FBSCM) and receive a special Michigan tax credit, for up to half of your contribution. That’s in addition to any federal deduction you might claim.

Form 8396, mortgage interest credit (for holders of qualified mortgage credit certificates issued by state or local governmental units or agencies) (SuDoc T 22.51:8396/) …

Senators hatch plan to finance tax breaks.(Legislature)(Targeted credits and broad deductions would come at the expense of the wealthy): An article from: The Register-Guard (Eugene, OR) $9.95 This digital document is an article from The Register-Guard (Eugene, OR), published by Thomson Gale on June 19, 2007. The length of the article is 826 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.Citation DetailsTitle…

Adopting or changing a foreign corporation’s accounting method.: An article from: The Tax Adviser $9.95 This digital document is an article from The Tax Adviser, published by American Institute of CPA’s on July 1, 2009. The length of the article is 1056 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available immediately after purchase. You can view it with any web browser.Citation DetailsTitle: Adopting or changing a foreign co…

The HAPPY Act to provide tax credit for pet and veterinary care by U.S. Rep. Thaddeus McCotter

Question: Can anyone please explain how the IRS views tax deductions of Finance charges from charge cards vs credit Line?

With a credit line I receive a 1099 declaring Interest paid from the bank. I receive nothing from the Credit Card company however both must be paid. My accountant does not believe A Business Credit Card Interest is Tax Deductible. I believe that both are viable forms of credit extension therefore reasonable and legal forms of business to finance service or goods. Can anyone provide additional information to short term finance interest expenses. Thank You. Business Minded.
When I said a line of credit it is a business line. Not a home line of credit. The Business Credit card is actually used strictly for business. It is used to purchase equipment or short term purchases of 1000 to 10,000 for 2 to 6 months because my suppliers only except credit cards. I could pay off with line of credit each month however, payment terms are not as flexible as Credit Card.

Answer: Credit and finance costs are always valid business expenses as long as they are reasonable and necessary. If your accountant says that they are not, find a competent accountant; yours is not.

This assumes of course that you are talking about business expenses. A “business” card used for personal expenditures would not generate deductible interest of course, whether you owned a business or not.

Accident Blocks Route 17 in Logan

Route 17 was blocked for a short time Tuesday after an accident.

Tax Deductions for Home Based Business – Gabby Huguenin’s Wealth Coaching Call

Question: Difference between tax credits and tax deductions for single tax payers in the 25% tax bracket?

Demonstrate the differences resulting from a $1,000 tax credit versus a $1,000 tax deduction for a single tax payer in the 25% bracket with $40,000 of pretax income.

Answer: A deduction is simply a reduction in the amount of taxable income. Therefore, if you claim a $1000 deduction, you will reduce your taxable income by the same amount. If you are in a 25 percent tax bracket then your total tax savings from this $1000 reduction in taxable income would be $250 (25% of $1000). On the other hand a tax credit is a dollar for dollar reduction in your tax liability. Therefore if you were able to take a $1000 tax credit, you would reduce your tax liability by the full amount of the credit, or $1000…a much better deal.

Bill Thomas: Real estate dreams, schemes helped doom economy

When Bill Thomas was chairman of the tax-writing House Ways and Means Committee, he thought too much emphasis was being placed on home ownership. “If you can afford to buy a house, you are rewarded handsomely in a number of financial ways. If you can’t, you are punished because you pay rent. You can’t even subtract rent from your income tax,” said Thomas, who retired in 2006 after representing …

The tax allowance for dependents: Deductions versus credits …

Tax Law, Real Estate & Credit Tips : Paycheck Tax Deduction Estimate

Question: I have a child support question regarding tax deduction?

I would like to know why the government do not allow tax deduction or tax credit for those paying child support, But on the other hand gives a child tax credit to the custiodal parent? I think child support was just a way to correct a government policy that went wrong. You promises theses single mothers theses government programs and now that the government can not afford it, lets deduct the standard of living for some else. That is probably the reason we are continuing to have the pro-life versus the pro-choice debate, because some appointed officals decided on a social policy that was taken out of the democratic processes. Also, why is child support gender base? Why do a judge makes the assumption that it is in the best interest of the child to be with the mother, where was this research perform to give this basis? Also, where in the constitution that gives the government the right to throw you in jail if you can not pay a debt, that is not a tax? Just my opinion.

Answer: Child support isn’t gender based – there are many fathers with custody, and mothers paying child support.

Very early on, there was an assumption that the father should have custody, then for many years the mother had the advantage. Now it can go either way, and the decision is supposed to be made in the best interest of the child.

If you have a child, then you take on an obligation to support that child.

This tax season, know the available deductions for homeowners

Search for new homes, condos, and other real estate in Washington, D.C., Maryland and Virginia. Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site.

The tax allowance for dependents: Deductions versus credits …

Solar Panel Tax Deduction Base Off Gross or Net?