Tax Credit Opportunities, tax deductions aren\’t the only things to consider when looking for ways to reduce your 2013 tax bill. There are a number of tax credits that you may be able to claim. A tax credit reduces your tax liability dollar for dollar (and, in some instances, may be fully or partially \”refundable\” to the extent of any excess credit).
Parents of children under age 17 may claim a child tax credit of up to $1,000 per qualified child. The child tax credit is phased out for higher income taxpayers.
A different credit of up to $12,970 is available for the payment of qualified adoption expenses, such as adoption fees, attorney fees, and court costs. The credit is phased out at certain income levels, and there are certain restrictions as to the tax year in which the credit is available.
Look into claiming the ch care credit if you pay for child under age 13 while It\’s available for 20% (or r of up to- $3,000 of qualifyi expenses ($6,000 for two more dependents). This c isn\’t confined to child car expenses – it may also b applicable for the care of disabled spouse or anothe adult dependent.
Higher Education Credits
The American Opportunity credit can be as much as $2,500 annually (per student) for
the payment of tuition and related expenses for the first four years of college. A different credit known as the Lifetime Learning credit is available for undergraduate or graduate tuition and for job training courses (maximum credit of $2,000 per tax return). You\’re not allowed to claim both credits for the same student\’s expenses, and both credits are subject to income-based phaseouts arid other requirements.
One credit that taxpayers sometimes miss is the credit for excess Social Security tax withheld. If you work for two or more employers and your combined wages total more than the Social Security taxable wage base ($113,700 in 2013), too much Social Security tax will be withheld from your pay. You can claim the excess as a credit against your income tax.
The alternative minimum tax (AMT) credit is another credit easy to overlook. If you paid the AMT last year, youmay be able to take a credit least some of the AMT you paid. The credit is available only for AMT paid with respect to certain \”deferral preference\” items, such as ajustment required with incentive stock options are exercised.
We can provide more details regarding these and other tax credits that may be available to you or your business.
IRA Transfers to Charity
Eligible individuals may exclude from income certain individual retirement account (IRA) withdrawals they use to make charitable donations. In addition to being income-tax free, qualifying charitable transfers count toward a donor\’s \”required minimum distribution\” (RMD) obligation for the year and may generate other tax benefits.
Restrictions include the following:
- The donor must be at least. 70-1/2.
- The recipient must be a qualifying charity.
- The transfer must be made in a tax year beginning before January 1, 2014.
- The transfer must come from an IRA and not an employer\’s retirement, plan.*
- The transfer must go directly from the IRA trustee to the charity.
- The qualifying transfer can he 110 more than $100,000 per donor.
* Special rules apply to SEP IRAs and SIMPLE IRAs.