This guest post is by Deborah Lee. Deborah is a graduate of Covenant Theological Seminary and a tax professional with H&R Block. Her specialties include clergy and small business returns. You can find her at http://mytaxhelplady.com
Whenever a person makes a life change like returning to school, there are usually tax changes that go along with that. Here are a few things that may affect you in 2009 when you file your 2008 tax return:
- Income Changes: Changes in your income may make you eligible for the Earned Income Credit. That could mean up to $4824 extra in your tax refund if you have two dependents, $2917 for one dependent, and $438 with no dependents.
- Child Credits: Two credits–the Child Tax Credit and the Additional Child Tax Credit–can provide taxpayers with up to $1000 per child. Child care expenses may also be claimed for a benefit, but you can only count child care costs for when both parents are working or in school.
- Education Benefits: There are several deductions and credits available for your current school tuition. Books aren’t always deductible. If you do qualify to deduct books on it is restricted to items that are only available through the seminary and are required for your course work. This would include printed syllabi that you must purchase.
- Student Loan Interest: Interest paid on student loans is also deductible. They do not have to be Federal loans. Any loan interest can be deducted as long as it was taken out near the time you were going to school and were use for tuition & fees, room & board, books & supplies, etc.
- Sale of Home: Many students sell their home to come to seminary. If you lived in your previous house at least 2 years out of the last 5 years you do not have to worry about paying tax on you home sale unless you made at least $250,000 profit ($500,000 for couples).
- Buying a Home: If you are purchasing a home for the first time or if at has been at least 3 years since you owned a home, then you may be eligible for a credit up to $8000.
If purchased between between April 10, 2008 and December 31, 2008. You may choose to take a credit for $7500 that must be paid back at $500 a year over the next 15 years through your tax return.
With the new stimulus plan, the credit has changed for homes purchased between January 1, 2009 and November 30, 2009. The credit has been increased to $8000 and does not need to be paid back as long as you live in them at least 3 years.
- Taxable Scholarships: Scholarships are not taxable as long as they are used for tuition, books, equipment, or fees. Scholarship money that is used for other living expenses or other uses could be taxed.
- New Property Tax Deduction: You can now deduct property taxes on your home even if you don’t have enough deductions to itemize on Schedule A. The maximum deduction is $500 for an individual or $1000 for married couples.
- Economic Stimulus Payments: Be sure you know how much you received as a stimulus payment when you are doing your return. Don’t worry, you won’t pay tax on it. Your situation should be looked at in 2008 to see if you qualify for more. If you do you will get that as part of your refund. If you received too much last year, then you get to keep it. You can find out how much your stimulus payment was by going to the IRS website.
Is some of this new to you? Do you think you may have missed something last year. There’s no need to worry since tax returns can be amended for 3 years.
Find free tools, tips and information at http://www.mytaxhelplady.com