Turning a home into a rental unit can help cover the carrying costs and at the same time produce a good tax deduction. Up to $25,000 worth of rental losses may be deductible each year which can make a big difference on your tax return. Real estate taxes and mortgage interest are a couple examples of deductible expenses. In addition you are also able to write off the cost of insurance, utilities, repairs and even mileage. All these expenses reduce the rental income you are receiving from your tenant. As always, it is important to contact one of our tax professionals with any questions you might have.
The Child Tax Credit is a $1,000 per child under the age of 17. There is also the Earned Income Credit which can be as high as $5,700. Working parents with children under 13 years old may qualify for the Child and Dependent Care Credit. The IRS allows a credit up to 35% of your daycare costs. If you have one child you can claim up to $3,000 worth of daycare expenses, and $6,000 if you have more than one child in daycare. The rules on who qualifies as a child are more complicated than they should be and most of these credits are going to have income limitations so make sure you contact a tax professional to find out if you qualify.
The American Opportunity Tax Credit is a credit for 100% of the first $2,000 of qualified education expenses. The total credit can be as high as $2,500 and 40% refundable. Eligible expenses include book and supplies in addition to tuition. Even if you took out loans to help pay for college you can qualify for the credit this year. There are certain restrictions so make sure you contact a tax specialist to find out if you qualify.
The taxation of retirement income in Michigan has changed for 2012 and it is solely based on when you were born. If you were born before 1946 the rules for you stay the same. But if you were born after 1946 and before 1953 the maximum retirement income you can deduct is $40,000 for a married couple and $20,000 for singles. In addition to this deduction your social security is non-taxable. All of the new laws are based on the oldest spouse in the relationship. So the age of whoever was born first will determine which rules apply to you. The new law can be confusing so make sure to contact one of our tax professionals with any questions you have.
The IRS allows a miscellaneous itemized deduction for expenses incurred while searching for a new job in your current line of work. Fees paid to recruiters, costs of producing your resume, as well as any advertising you might have done are all examples of expenses that qualify. In addition, local and out of town travel expenses are deductible while traveling for interviews. Your expenses are deductible whether or not you found employment. You do have to itemize in order to claim these expenses and there are certain income limitations that apply so make sure to contact one of our tax professionals to find out if this deduction will work for you.
If you make a retirement plan contribution you could qualify for a credit of up to $2,000. The credit ranges from 10% all the way up to 50% of what you contribute into your retirement plan. If your income is less than approximately $57,000 for a married couple or $28,000 for a single person this credit might work for you. Even though we are now into 2013 you are still allowed to create and contribute to certain retirement plans. This is one of those few cases where you can consult with your tax professional and make a decision that will impact your 2012 tax return during 2013.
