Tax Benefits for Higher Education

Higher education costs paid in 2016 can mean tax savings when taxpayers file their tax returns. If taxpayers, their spouses or their dependents took post-high school coursework last year, they may be eligible for a tax credit or deduction.

Here are some facts from the IRS about tax benefits for higher education.

For 2016, there are two tax credits available to help taxpayers offset the costs of higher education. The American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of income tax owed. Use Form 8863 to claim the education credits.

The American Opportunity Credit (AOC) is:

• Worth a maximum benefit up to $2,500 per eligible student.
• Only for the first four years at an eligible college or vocational school.
• For students pursuing a degree or other recognized education credential.
• For students enrolled at least half time for at least one academic period during 2016. Taxpayers can claim the AOC for a student enrolled in the first three months of 2017 as long as they paid qualified expenses in 2016.

The Lifetime Learning Credit (LLC) is:

• Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify.
• Available for all years of postsecondary education and for courses to acquire or improve job skills.
• Available for an unlimited number of tax years

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.

Get Credit for Making a Home Energy Efficient

Taxpayers who made certain energy efficient improvements to their home last year may qualify for a tax credit this year. Here are some key facts to know about home energy tax credits:

Non-Business Energy Property Credit

• Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items added to a taxpayer’s main home last year. Qualified improvements include adding insulation, energy-efficient exterior windows and doors, and certain roofs. Do not include the cost to install these items.
• The other part of the credit is not a percentage of the cost. It includes the installation costs of certain high-efficiency heating and air-conditioning systems, high-efficiency water heaters and stoves that burn biomass fuel. The credit amount for each type of property has a different dollar limit.
• This credit has a maximum lifetime limit of $500. Taxpayers may only use $200 of this limit for windows.
• A taxpayer’s main home must be located in the U.S. to qualify for the credit. The non-business energy property credit is only available for existing homes.
• Be sure to have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. Taxpayers can use this to claim the credit. Do not attach it to a tax return. Keep it with tax records.
• Taxpayers may claim the credit on their 2016 tax return if they didn’t reach the lifetime limit in past years. Under current law, Dec. 31, 2016, was the deadline for qualifying improvements to the taxpayer’s main U. S. home.

Residential Energy Efficient Property Credit

• This tax credit is 30 percent of the cost of alternative energy equipment installed on or in a home. This includes the cost of installation.
• Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
• There is no dollar limit on the credit for most types of property. If the credit is more than the tax owed, carry forward the unused portion of this credit to next year’s tax return.
• The home must be in the U.S. It does not have to be a taxpayer’s main home, unless the alternative energy equipment is qualified fuel cell property. The residential energy efficient property credit is available for both existing homes and homes under construction.
• This credit is available through 2016.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.

IRS Urges Employers to Take Advantage of Expanded Work Opportunity Tax Credit

With a key certification deadline fast approaching, the Internal Revenue Service today urged employers to take advantage of a valuable tax credit designed to help those who hire long-term unemployment recipients, certain veterans, recipients of various kinds of public assistance and other workers who face significant barriers to employment.

The Protecting Americans from Tax Hikes (PATH) Act, enacted last December, retroactively extended the Work Opportunity Tax Credit (WOTC) for nine categories of workers hired on or after Jan. 1, 2015. For the first time, the legislation also added a tenth category for long-term unemployment recipients hired on or after Jan. 1, 2016 who had been unemployed for a period of at least 27 weeks and received state or federal unemployment benefits during part or all of that time. The special Sept. 28, 2016 certification deadline applies to eligible workers hired between Jan. 1, 2015 and Aug. 31, 2016.

Normally, to qualify for the credit, an employer must first request certification by filing IRS Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. But due to the late enactment of the legislation extending the WOTC and its retroactive impact, the IRS is giving employers extra time, until Sept. 28, to make requests related to eligible workers hired any time in 2015 and during the first eight months of 2016. The regular 28-day rule will again apply for any eligible worker hired after Aug. 31, 2016. Other requirements and further details can be found in the instructions to Form 8850, Notice 2016-22 and Notice 2016-40, available on IRS.gov.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Home Energy Tax Credits Save You Money at Tax Time

Certain energy-efficient home improvements can cut your energy bills and save you money at tax time.
Residential Energy Efficient Property Credit

This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
Qualified wind turbine and fuel cell property must be placed into service by Dec. 31, 2016. Hot water heaters and solar electric equipment must be placed in to service by Dec. 31, 2021.
The tax credit for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity. The amount for other qualified expenditures does not have a limit. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Child and Dependent Care Credit this Summer

Day camps are common during the summer months. Many parents enroll their children in a day camp or pay for day care so they can work or look for work. If this applies to you, your costs may qualify for a federal tax credit. Here are 10 things to know about the Child and Dependent Care Credit:
1. Care for Qualifying Persons.
2. Work-related Expenses.
3. Earned Income Required.
4. Joint Return if Married.
5. Type of Care.
6. Credit Amount.
7. Expense Limits.
8. Certain Care Does Not Qualify.
9. Keep Records and Receipts
10. Dependent Care Benefits.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Struggling to Pay Tax Bill?

People facing financial difficulties may find that there's a tax impact to events such as job loss, debt forgiveness or tapping a retirement fund. For example, if your income decreased, you may be newly eligible for certain tax credits, such as the Earned Income Tax Credit.
Most importantly, if you believe you may have trouble paying your tax bill, contact the IRS immediately. In many cases, there are steps we can take to help ease the burden. You also should file a tax return even if you are unable to pay so you can avoid additional penalties.

Contact Neikirk, Mahoney & Smith for more information 502-896-2999.