Latest News on Denver Accounting & Taxes

Becoming a new parent can be expensive, so make sure to stay on top of things and keep these deductions and credits in mind when it comes to your taxes:

Dependent Exemption: This is probably the most beneficial tax exemption if you have children. Basically, the reduction lowers your taxable income. Each year it changes, but for the new tax year, it is $4,000 per child. That’s $50 more than 2014.

Child and Dependent Care Credit: If you’re going to pay for child care for your dependents because you’re going back to work or school, you can use this credit to claim up to 35% of expenses of $3,000 for one qualifying dependent.

Child Tax Credit: You may be eligible for this credit which reduces your taxes dollar for dollar. It’s an additional $1,000 you may be able to claim for children under 17.

Medical expenses: If your medical expenses are more than 10% of your adjusted gross income, you may be able to deduct them. Make sure to keep receipts for even a routine check-up.

Open a 529 to manage your college fund: A 529 is a Qualified Tuition Program that is a tax-advantaged savings plan where distributions for college expense are not taxable if they are less than or equal to qualified education expenses.

When expecting a little one, it’s a good idea to get a head start understanding what you can and can’t deduct as well as what credits you qualify for. As always, Bloch, Rothman, & Associates, your Denver Tax Service is here to advise you on this exciting time in your life!

What are mortgage points and how do I deduct them on my taxes?

A mortgage point is defined as 1% of your mortgage. If your home loan is $200,000, then a mortgage point is equal to $2,000. There are two types of points, origination points and discount points. Discount points are often deductible and are a type of prepaid interest. Origination points are income for the loan originator.

How do mortgage point deductions work?

In most cases, the IRS lets you deduct points for the full amount you pay for them.  They are considered an itemized deductions and are claimed on Schedule A of Form 1040. The IRS has the following requirements when deducting mortgage points:

• The mortgage must be used to buy or build your primary residence
• The amount of points paid must not be excessive for your area
• You must use cash accounting on your taxes
• The points must not be used for items that are typically stand-alone fees, such as property taxes
• You cannot have borrowed the funds to pay for the points from the mortgage lender or broker
• The amount you pay must be clearly itemized as points on your statement
 
It’s important to remember when purchasing a home, that mortgage points must be paid upfront along with your down payment and can have a huge effect on home affordability. Additionally, if you don’t follow the IRS rules exactly, you may not qualify for a tax deduction. Buying a home is exciting, make sure you make the most of it! Call your Denver accountant today to get the help and advice you need when it comes to mortgage points. 

Paying back student loans is expensive and it’s natural to want to save as much money as possible. You may be wondering - are your payments tax deductible?  Unfortunately, you can’t deduct your entire payment, only the portion that covers your interest charges. It’s important to know the correct way to report the interest on your income taxes so it can reduce the amount of tax you pay at the end of the year. Here are some facts and tips to help navigate your student loan deductions:

• Married persons who file separately cannot claim a deduction for student loan interest.
• Interest deduction is available to you only if your modified adjusted gross income is below the annual limit. It was more than $80,000 or $160,000 if filing a joint return. 
• You can only claim the deduction for interest on parts of your student loan that actually funded educated related expenses. 
• You cannot claim the deduction if someone can claim you as a dependent on their tax return. 
• You cannot claim the deduction using Form 1040EZ 

Tax returns can get complicated, that’s where your Denver tax service comes into play. Bloch, Rothman, and Associates will make sure that you get the most out of your tax return and your student loans.

Once you’re married, a lot of changes happen, both in your personal life and in your finances. As a couple, it’s important to stay on top of your taxes to make sure that you’re getting the most out of your combined income. Your Denver accountant can make sure you have considered all needed aspects of this change and provide sound advice for your financial status.

Tax Liability
The first thing to take into account is that your tax liability will change depending on your spouse’s income. Make sure to adjust your tax withholding with your employer to make sure that you don’t over or under pay your taxes. If you find out your tax liability is lower now that you’re married, you can increase your W-4 allowances, which allows you to have less income tax taken out of each paycheck. If your spouse’s income is higher or comparable to yours, your total tax liability may increase.  Make sure to check with your employer to change your holding allowance.

Itemize Your Deductions
When you’re married, it may make sense to itemize your deductions instead of using a standard deduction to save more money. When you itemize deductions, it can get a little more complicated and require more effort – it is smart to contact a tax specialist to get help with this.

Decide to File Jointly or Separately
After you’re married, you have the option to file jointly or separately and make sure that you’re getting the lowest tax liability. Keep in mind that when you file separately while married, you may lose some tax credits and deductions such as education tax benefits and earned income tax credit.  

Many things change when you get married, including your finances and taxes. Make sure that you get the most out of it by contacting a tax preparer for expert advice on your tax status after marriage and what it means for your financial future. 

Claiming your child as a dependent is an obvious measure. But did you know that you can claim exemptions for elderly parents or other relatives that qualify as dependents? For each dependent, you can deduct $4,000 from your federal taxable income. Here is how to tell if you can claim a dependency exemption:

1. The person must be a relative or live in your household the entire year. The category of relatives is broad and includes people from a foster child to you’re a sister-in-law. Check out the IRS website for a complete list of who qualifies as a relative.


2. The person’s taxable income must be less than $4,000 – keep in mind that this changes every year.


3. Half of the support needed for a dependent must be paid for by you during the year.

Filing people as dependents can be a confusing process. Luckily, Bloch, Rothman, and Associates are here to help you with your Denver tax return to make sure that you are getting the most out of your deductions and exemptions. Give us a call today for a free consultation!