Tuesday, August 23, 2011

Back To School Basics

As the end of summer is upon us, it ushers in the college students’ return to campus and memories of the first day of class, football, and tailgating. Many students and parents are facing this adventure for the first time and others are veterans of the process. In either case, it’s an active, exciting and increasingly expensive period in a young adults life. As this transition takes place, be mindful of the expenses you incur and how you are tracking them as they may provide you with tax benefits at year-end. Tax benefits, generally, are applicable to you, your spouse, or a dependent for whom you claim an exemption for on your tax return. There are four primary tax benefits available to you as a taxpayer: the American Opportunity Credit, the Lifetime Learning Credit, the Tuition and Fees Deduction, and the Student Loan Interest deduction. The premise is simple, pay for college and receive a tax benefit. Unfortunately, as with many credits and deductions, you must read the fine print. Let’s take a look at each credit a little closer to determine where you might benefit.

American Opportunity Credit

This credit is available through 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).

Lifetime Learning Credit

In 2011, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student, but to claim the credit, your modified adjusted gross income must be below $60,000 ($120,000 if married filing jointly).

Tuition and Fees Deduction

This deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011 even if you do not itemize your deductions. Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000 if married filing jointly).

Student Loan Interest Deduction

Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

For more information or for an analysis on which of the above tax benefits fits your specific circumstances, please contact our Firm for further guidance. Good luck to all the students beginning their college years. More importantly, good luck to all of the parents on surviving!

brad@mcarthurco.com
704.544.8429

Monday, August 15, 2011

Buy Low, Sell High!

Are you in the process of selling your home? Well, if you are one of the lucky ones that will be facing a gain from the sale of your main home, then there may be an opportunity to exclude some or all of that gain from your income.


  • Typically you are eligible to exclude some or all of the gain if your home has been your main home for at least two out of the last five years

  • The exclusion caps out at a $250,000 gain ($500,000 for a joint return)

  • Any gain that is not eligible for exclusion is taxable. This is reported on Schedule D of your 1040 (individual tax return)

  • Losses from the sale of your home are not deductible

  • Exclusion is not available if you excluded gain from the sale of another home in the last two years

  • Have more than one home? Only your main home is eligible for the exclusion

Remember the first-time homebuyer credit? Those that took advantage of that must live in the home as a primary residence for three years. If you convert this to a rental or non-primary residence less than three years from purchase, you will have to pay the credit back. So before you put your home on the market, or put a rental ad in the paper, be sure that you have owned the home for at least three years to avoid repayment.


Check out this publication from the IRS on Selling Your Home: http://http://www.irs.gov/publications/p523/ar01.html


brad@mcarthurco.com


704.544.8429



Wednesday, August 10, 2011

Who's On First?

I'm not the one who typically participates in email forwards, but today I'll make an exception for one of my favorite skits of all-time. I hope you enjoy.


You have to be old enough to remember Abbott and Costello, and too old to REALLY understand computers, to fully appreciate this. For those of us who sometimes get flustered by our computers, please read on...

If Bud Abbott and Lou Costello were alive today, their infamous sketch, 'Who's on First?' might have turned out something like this:

COSTELLO CALLS TO BUY A COMPUTER FROM ABBOTT

ABBOTT: Super Duper computer store. Can I help you?

COSTELLO: Thanks I'm setting up an office in my den and I'm thinking about buying a computer.

ABBOTT: Mac?

COSTELLO: No, the name's Lou.

ABBOTT: Your computer?

COSTELLO: I don't own a computer. I want to buy one.

ABBOTT: Mac?

COSTELLO: I told you, my name's Lou.

ABBOTT: What about Windows?

COSTELLO: Why? Will it get stuffy in here?

ABBOTT: Do you want a computer with Windows?

COSTELLO: I don't know. What will I see when I look at the windows?

ABBOTT: Wallpaper.

COSTELLO: Never mind the windows. I need a computer and software.

ABBOTT: Software for Windows?

COSTELLO: No. On the computer! I need something I can use to write proposals, track expenses and run my business. What do you have?

ABBOTT: Office.

COSTELLO: Yeah, for my office. Can you recommend anything?

ABBOTT: I just did.

COSTELLO: You just did what?

ABBOTT: Recommend something.

COSTELLO: You recommended something?

ABBOTT: Yes.

COSTELLO: For my office?

ABBOTT: Yes.

COSTELLO: OK, what did you recommend for my office?

ABBOTT: Office.

COSTELLO: Yes, for my office!

ABBOTT: I recommend Office with Windows.

COSTELLO: I already have an office with windows! OK, let's just say I'm sitting at my computer and I want to type a proposal. What do I need?

ABBOTT: Word.

COSTELLO: What word?

ABBOTT: Word in Office.

COSTELLO: The only word in office is office.

ABBOTT: The Word in Office for Windows.

COSTELLO: Which word in office for windows?

ABBOTT: The Word you get when you click the blue 'W'.

COSTELLO: I'm going to click your blue 'w' if you don't start with some straight answers. What about financial bookkeeping? You have anything I can track my money with?

ABBOTT: Money.

COSTELLO: That's right. What do you have?

ABBOTT: Money.

COSTELLO: I need money to track my money?

ABBOTT: It comes bundled with your computer.

COSTELLO: What's bundled with my computer?

ABBOTT: Money.

COSTELLO: Money comes with my computer?

ABBOTT: Yes. No extra charge.

COSTELLO: I get a bundle of money with my computer? How much?

ABBOTT: One copy.

COSTELLO: Isn't it illegal to copy money?

ABBOTT: Microsoft gave us a license to copy Money.

COSTELLO: They can give you a license to copy money?

ABBOTT: Why not? THEY OWN IT!

(A few days later)

ABBOTT: Super Duper computer store. Can I help you?

COSTELLO: How do I turn my computer off?

ABBOTT: Click on 'START'.....

brad@mcarthurco.com
704.544.8429

Monday, August 1, 2011

I can deduct that?

With the current status of the economy, it is likely that most everyone knows at least one person that is seeking employment. Often there are costs associated with finding a job, did you know that some items can be a deduction on your taxes?

Here are some quick guidelines:


  • Costs are not deductible if you are searching for your first job

  • Employment and outplacement agency fees may be deductible

  • The printing and postage costs for mailing resumes my be deductible

  • All deductions only apply if you are seeking a job in your current occupation

  • Travel may be deductible, but there are some specific guidelines to follow related to amount of time spent looking for the job versus the amount of personal time spent while traveling

  • Costs are not deductible if there has been a significant amount of time between the end of your last job and the time you starting seeking employment

  • To deduct qualified expenses, the amount must be more than two percent of your income

To find out more about what expenses are deductible, visit www.irs.gov or consult with your CPA.


brad@mcarthurco.com


704.544.8429