1) A person who files a joint return (other than a return filed solely to claim a refund) cannot be claimed as a dependent. Also, special rules apply to children of divorced parents.
2) Benefits such as a credit, deduction or income exclusion may be available for certain education expenses. Benefits may be phased out at certain income levels. List the following expenses: (a) tuition and required fees, (b) books, supplies and equipment required for attendance, (c) room and board (if at least half-time attendance) and (d) student loan interest.
3) IRA contributions are limited to the lesser of $5,000 ($6,000 if age 50 or older at year-end) or compensation. For Roth IRAs, the contribution is phased out at certain levels of income. A spousal IRA can be set up for a nonworking spouse if the working spouse’s compensation is high enough.
4) You can exclude up to $250,000 ($500,000 if married and filing jointly or certain surviving spouses) of the gain on a sale of a principal residence if you owned and occupied the residence for two out of the five years before the date of sale. If the home was used other than as your principal residence any time after 2008, some of the gain may be taxable.
5) Interest on certain U.S. savings bonds issued after 1989 is tax-exempt if proceeds are used for qualified educational expenses of a taxpayer, spouse or dependent, subject to AGI based phase-out.
6) Keep receipts supporting tax deductions at least four years.
7) Improvement costs may reduce taxable gain upon sale of property. Keep records of improvement costs made to all real property at least four years after the property is sold.
8) If stock or mutual fund dividends are automatically reinvested instead of received in cash, these reinvestments increase cost basis, and reduce gain or increase loss upon sale.
9) If “allocated tips” are listed on year-end Form W-2, the amount will be subject to both Social Security and income tax unless records (tip log) verify that a lesser amount was actually received.
10) If married, child care credit is generally available only if both spouses have earned income. Exceptions apply if spouse is full-time student or disabled.
11) Individuals covered only by a high deductible health plan (deductible between $1,200 and $6,050 for individual coverage and between $2,400 and $12,100 for family coverage) can make deductible (subject to limits) HSA contributions.
12) Cancellation of debt (COD) generally results in taxable income. However, exceptions are available for bankrupt and insolvent taxpayers as well as for cancellations or reductions of student loans, farm-related loans, mortgages on principal residences and loans related to business real property.
13) Qualified long-term care insurance premiums are deductible subject to age and annual dollar limits.
14) Loan origination fees (points) are deductible as interest by a buyer of a principal residence. Points paid on refinancing an existing mortgage must be deducted (amortized) over the life of the new mortgage.
15) Charitable contributions of $250 or more in any one day to any one organization must have written acknowledgment from the organization. The acknowledgment must state whether or not any goods or services were received in exchange for the donation.
16) When making contributions of used furniture, appliances and clothing to nonprofit organizations, attach a record of the items donated to the receipt for proof of this deductible contribution. Contributions must be in good or better condition to be deductible.
17) Generally, a net loss due to a casualty (such as flood, fire, theft, etc.) is deductible to the extent it exceeds 10% of your AGI. Special rules apply to federally declared disasters. Ask me for details.
18) Expenses incurred for education for improving your skills for your present job or maintaining your job may be deducted. Seminars, tuition, books and some travel expenses can be deducted.
19) Job-seeking costs in the same field of employment are deductible. Successful job placement is not necessary.
20) Part of a legal fee incurred in a divorce or an estate plan may be deductible if it is for advice on the tax consequences. Have your attorney clearly indicate how much of the fee is for tax advice.
21) Expenses incurred for attending conventions, seminars or other meetings that give investment advice to taxpayers are not deductible.
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