Deducting Student Loan Interest

Deducting Student Loan Interest, financing a college or graduate school education often requires incurring at least some student-loan debt. For those who qualify for it, the tax deduction for student-loan interest can help ease the financial burden.

Overview, The deduction is available for as much as $2,500 of interest annually. Taxpayers don\’t. have to itemize their deductions to claim it. However, the deduction is phased out if adjusted gross income (AGI) exceeds certain levels. And married taxpayers must me jointly to Claim the deduction.

Qualifying loans.

The debt must be incurred to pay tuition, room and board (including properly documented off campus expenditures), and related expenses to attend a post -high school educational institution. The funds may be borrowed to cover the qualifying expenses of the taxpayer or his or her spouse or dependent. The student must be a degree candidate carrying at least half the normal full-time course load. Loans taken to attend certain postgraduate programs (e.g., a medical residency) also can qualify.

Who gets the deduction?

Only the person legally obligated make the interest payments may deduct them. So, for example, if parents make payments on their child\’s student loan (essentially as a gift to the (\’child), the parents aren\’t allowed to deduct the interest. Their child could deduct t he interest they paid as long as the child isn\’t a dependent that year. (A dependent may not claim the deduction.)

AGI Limits. ,\”For 2012, no deduction is available with AGI of $75,000 or more ($155,000 or more for married-joint filers). The deduction is reduced with AGI between $60,000 and $75,000 ($125,000 and $155,000 for married-joint filers). Absent new legislation, the AGI limits will be lower after 2012, and only the first 60 months of required interest will he deductible.


Capture Tax Breaks For Equipment Purchases

Businesses that intend to purchase equipment may want to do so before year-end. Tax provisions allowing businesses to claim generous first-year deductions for purchases of qualifying capital assets won\’t be available next year – or will he far more limited – unless lawmakers agree the Lax breaks should be continued.

Bonus depreciation. Assets generally must be acquired and placed in service during the 20 12 calendar year to be eligible for a bonus first-year depreciation deduction equal to 50% of cost. This deduction is available in addition to regular depreciation (which is calculated on the remaining cost, net of the bonus depreciation).

To be eligible, an asset generally must have a useful life of 20 years or less under the tax law\’s modified accelerated cost recovery system (MACRS). Used assets don\’t qualify.

Section 179 expensing.

Within limits, businesses may elect to expense the cost of new or used machinery and equipment (or other eligible property) in the year it is placed in service. ,\”or the 2012 tax year, the Section 179 election may be as much as $I39,000, reduced dollar for dollar as qualifying purchases exceed $560,000. The dollar limitation is scheduled to drop to $25,000 and the investment ceiling to $200,000 for the 2013 tax year. The Section 179 deduction can\’t be more than the year\’s active trade or business income, but any excess amount generally may be carried forward for deduction in future tax years.


Tax Report November 2012 Checking Charities

The IRS has launched Exempt Organizations Select Check, an on line search tool on that taxpayers can use to find out whether an organization is eligible to receive tax-deductible contributions. However, the database is not ail-inclusive. Certain eligible organizations are not listed. The tool also allows users to search for organizations whose federal tax exemption was automatically revoked for failure to file a Form 990 -series return or notice for three consecutive years.

IRS Letter-forwarding Program

If a person is trying to locate a taxpayer to convey a message for a humane purpose or because of an emergency situation, the IRS may be able to help by forwarding a letter to the missing taxpayer. For example, the IRS Will forward letters to notify a person of a close relatives serous Illness, Imminent death, or death. A written request that briefly explains the need for letter -forwarding and the Social security number of the individual being sought should be Included With a copy of the letter to be forwarded_ The IRS Will no longer forward letters to taxpayers who may be owed assets from an individual, company, or organization.


The general information in this publication is not intended to be nor should it be treated as tax, legal, or accounting advice_ Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented_ This information is not intended to be nor can it be used by any taxpayer for the purpose of avoiding tax penalties.

November 2012 Page 2

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