It's that time of year, again. Are you ready to start your taxes?
With all the changes in healthcare and tax laws, better to start early and give yourself time to ask the right questions.
Here's a quick list of 2013 Tax Tips for Families -
Claim Your Exemptions
An exemption is dollar amount you can deduct for yourself or a dependent. It reduces the amount of income on which you are taxed.
- For YOU - $3,900 exemption
- For your Spouse - $3,900
- For each Dependant - $3,900
Did you have a child this year? Your new bundle of joy just earned you another $3,900 exemption!
What is a dependent? Ask yourself these questions-
- Do I have a child, stepchild, foster child, even a grandchild in my home?
- Is he under 19 as of 12/31/13?
- Is she younger than 24 years old if a full-time student, meaning she was in school at least 5 months during the year?
Still not sure? Take a the IRS quiz Who Can I Count as a Dependent?
Add It Up - A Married Couple with Three Kids = ($3,900 x 5)=$19,500
Divorced or Separated in 2013?
Grab your divorce papers or start the negotiations as to who can claim dependents. The IRS has instructions just for you.
Tax Effect of the Affordable Care Act
With the implementation of the Affordable Care Act on January 1, 2014, every US citizen will experience SOME change in taxes. Do you know how it affects you?
- Healthcare Requirement Starting in Jan 2014, all families must have health insurance or claim an exemption from coverage. If not, you'll "get" to pay on your 2014 tax filing. What does it "cost" to live without health insurance? For an adult, you'll be assessed $95 or 1% of your income, whichever is greater. Plus, as an uninsured indiidual, you get to pay for all health care costs yourself. Guess what? That fee amount is set to more than double the following year.
- Enrollment Deadlines If you're not eligible for coverage through an employer, you can enroll on the Health Insurance Marketplace. Enrollment started October 1st. Want coverage starting February 1st? Enroll TODAY (January 15th) at HealthCare.gov. You've got until March 31st to enroll or you'll have to wait until the next enrollment period, typically in a year.
- Premium Tax Credit If you've signed up for health insurance at the Marketplace, chances are you already know if you're eligible for a Premium Tax Credit, designed to make purchasing health insurance affordable for moderate income families. Want to make life even easier? Have payments sent directly to your insurer or pay them yourself and claim credit on 2014 taxes. Either way, you'll need to double check the amounts at the end of the year. Don't forget to let your marketplace know of any changes in your family's income or size so you're receiving the appropriate assistance.
Mountains of Medical Expenses? If you've had "one of those years," and the medical expenses have piled up, see if you can claim another deduction. To claim a medical expense on your taxes, you must Itemize Your Deductions, which means to use Schedule A and list out things like medical expenses, mortgage interest and real estate taxes. Starting January 1, 2013, to be eligible for a deduction, medical expenses must now be over 10% of Adjusted Gross Income (AGI), although the over-65 crowd can still use 7.5% until 2016. What can count as a "medical expense?" More than you'd think
- Special instruction, such as speech therapy or programs if accommodating your child's disability
- Breast pumps and supplies that assist lactation
- Pregnancy tests
- Fertility treatments such as in vitro or vasectemy reversals
- Specialty foods, meaning the "extra" cost of purchasing gluten-freen foods over regular foods for a child with a gluten allergy
- Transportation and lodging for medical care (bus fares, air fares, hotels)
Did you know that if you are self-employed, you can deduct 100% of qualifying health insurance premiums, evenf if you don't itemize. Still wondering if it's a qualified medical expense? More info in the Publication 502 Medical and Dental Expenses.
It Pays to Learn
Do you have children in college? Have you gone back to school yourself? Under the American Opportunity Credit or Lifetime Learning Credit you may be eligible to deduct $2500 per year for up to four years of college education or even up to $2000 of any post-secondary class. More info on how to use both of these tax credits.
It Pays to Earn
If your family includes two working parents, and you need childcare so you can work, you may be eligible for a tax credit up to $3000. This also applies if you need childcare to go to school. Some preschool costs can also be considered childcare and this can apply to dependant parents who may be living with you. This credit is a bit trickier, so be sure to study up on qualified dependents and earned income restrictions under the Child and Dependant Care Expenses
Please note, this is a summary of general information and is subject to change. Please consult IRS.gov, HealthCare.gov and your tax advisor for more information or how these suggestions may apply to your family.
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