Selling Your Home
During summer months many people sell their home and move to a new location. Many of those individuals will make a profit on the sale and still will not have to pay a single dime of additional income tax to the IRS.
Generally, you have made a profit if the selling price of your home is greater than the price you paid to purchase the home. That profit, considered a capital gain, is subject to income tax. However, under certain circumstances the law allows you to exclude all or part of that gain from your income – that is, you may not have to pay tax on the profit.
This exclusion—up to $250,000 for individuals and $500,000 for married taxpayers filing joint returns—is not a once in a lifetime event. The exclusion may be claimed each time that you sell your main home, but generally no more often than once every two years.
To qualify, you must meet both the ownership and use tests.
Ownership Test: You must have owned the home for at least 2 years in the 5-year period ending on the date of the sale.
Use Test: You must have lived in the home as your main home at least 2 years during the 5-year period ending on the date of the sale.
If you and your spouse file a joint return and both meet the use test, you normally will be able to claim the exclusion for married couples even if the ownership test is met by only one of you.
If you do not meet these tests, you may still be allowed to exclude a reduced amount of the gain realized on the sale of your home. But you must have sold the home for other specific reasons such as serious health issues, a change in your place of employment, or certain unforeseen circumstances such as a divorce or legal separation, natural or man-made disasters resulting in a casualty to your home, or an involuntary conversion of your home.
If you are entitled to exclude the entire gain from the sale of your home, you do not need to report the gain on your federal tax return. However, if you are not entitled to exclude the entire amount of the gain, use Schedule D, Capital Gains and Losses, and Form 1040 to report the total gain, the portion that can be excluded, and the portion that is subject to capital gains tax.
For more details and information see IRS Publication 523, Selling Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Link:
* Link Publication 523, Selling Your Home -- http://www.irs.gov/pub/irs-pdf/p523.pdf
Monday, August 27, 2007
Monday, August 13, 2007
STT-2007-16: Help Offset Education Costs with Tax Credits and Deductions
Help Offset Education Costs with Tax Credits and Deductions
It is Back-to-School time and maybe time for a tax break, too. Whether you are paying for a college education or a teacher buying items for your classroom, education credits and deductions can help lower your tax bill.
The Hope Credit, Lifetime Learning Credit or the Tuition and Fees Deduction may help offset the cost of higher education for you, your spouse and your dependents.
The amount of these credits and deductions are based on the qualified education expenses, such as college or vocational school tuition and enrollment fees, that you paid during the year and may be limited by your modified adjusted gross income. Room and board, insurance or personal living expenses are not considered qualified education expenses.
The Hope Credit, which is up to a $1,650 tax credit per student per year, is available for only the first two years of college or vocational school.
The Lifetime Learning Credit, which is up to a $2,000 tax credit per tax return, applies to undergraduate, graduate and professional degree courses and there is no limit to the number of years you can take this credit.
The Tuition and Fees Deduction, which is up to a $4,000 deduction from your income, applies to undergraduate, graduate and professional degree courses. This deduction may be beneficial as the modified adjusted gross income limits are higher than the thresholds for the Hope and Lifetime Learning Credits.
Are you paying Student Loan interest? You may be able to deduct up to $2,500 from your income per tax return. Student Loan interest may be deducted even while your student is in school if you are paying the interest immediately rather than deferring the payments.
You cannot claim the Hope Credit, Lifetime Learning Credit and the Tuition and Fees Deduction for the same student in the same year. You will want to choose the credit or deduction that provides the greatest benefit. However, you can claim the Student Interest Loan deduction and one of these other benefits simultaneously.
Students and parents of students are not the only ones who can claim a Back-to-School tax benefit.
As summer comes to an end, many teachers and other eligible educators are preparing for the start of the new school year. That preparation could include purchasing items for the classroom from personal funds. Be sure to keep your receipts. These out-of-pocket classroom expenses can be deductible.
As an educator, you may be able to deduct up to $250 for expenses paid for the purchase of books, computer equipment and classroom supplies. If you and your spouse are filing a joint return and both are eligible educators, the maximum deduction is $500.
To find out more about the deduction for educator expenses, including who qualifies for this deduction, check out the IRS Web site at IRS.gov. In the search field, type in the key words “educator expenses.”
Additional information on the Hope and Lifetime Learning Credits, Tuition and Fees Deduction and Student Loan Interest Deduction is available in Publication 970, Tax Benefits for Education, found on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
It is Back-to-School time and maybe time for a tax break, too. Whether you are paying for a college education or a teacher buying items for your classroom, education credits and deductions can help lower your tax bill.
The Hope Credit, Lifetime Learning Credit or the Tuition and Fees Deduction may help offset the cost of higher education for you, your spouse and your dependents.
The amount of these credits and deductions are based on the qualified education expenses, such as college or vocational school tuition and enrollment fees, that you paid during the year and may be limited by your modified adjusted gross income. Room and board, insurance or personal living expenses are not considered qualified education expenses.
The Hope Credit, which is up to a $1,650 tax credit per student per year, is available for only the first two years of college or vocational school.
The Lifetime Learning Credit, which is up to a $2,000 tax credit per tax return, applies to undergraduate, graduate and professional degree courses and there is no limit to the number of years you can take this credit.
The Tuition and Fees Deduction, which is up to a $4,000 deduction from your income, applies to undergraduate, graduate and professional degree courses. This deduction may be beneficial as the modified adjusted gross income limits are higher than the thresholds for the Hope and Lifetime Learning Credits.
Are you paying Student Loan interest? You may be able to deduct up to $2,500 from your income per tax return. Student Loan interest may be deducted even while your student is in school if you are paying the interest immediately rather than deferring the payments.
You cannot claim the Hope Credit, Lifetime Learning Credit and the Tuition and Fees Deduction for the same student in the same year. You will want to choose the credit or deduction that provides the greatest benefit. However, you can claim the Student Interest Loan deduction and one of these other benefits simultaneously.
Students and parents of students are not the only ones who can claim a Back-to-School tax benefit.
As summer comes to an end, many teachers and other eligible educators are preparing for the start of the new school year. That preparation could include purchasing items for the classroom from personal funds. Be sure to keep your receipts. These out-of-pocket classroom expenses can be deductible.
As an educator, you may be able to deduct up to $250 for expenses paid for the purchase of books, computer equipment and classroom supplies. If you and your spouse are filing a joint return and both are eligible educators, the maximum deduction is $500.
To find out more about the deduction for educator expenses, including who qualifies for this deduction, check out the IRS Web site at IRS.gov. In the search field, type in the key words “educator expenses.”
Additional information on the Hope and Lifetime Learning Credits, Tuition and Fees Deduction and Student Loan Interest Deduction is available in Publication 970, Tax Benefits for Education, found on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
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