Kelly Bullis: Return awaits; it’s time to think of tax credits
Yahoo! Another year has passed, and it’s time to file your tax return again. I’m sure that you are overcome with emotion and excitement at the “fun” time ahead gathering all your records and making that annual journey into the bowels of IRS instructions that seem to only make sense to seasoned IRS agents. Somebody once made a joke about a GPS unit giving directions like IRS instructions.
To arrive at your destination, you must A) go straight; B) turn left; C) turn right; or D) go backwards. For purposes of arriving at your destination in A) above, you can either 1) go faster or 2) go slower. You are not allowed to stop. If you need B) above, you must use your left-turn signal. If you don’t have one, then go to Publication 463 to understand your other options before proceeding further.
Now that I have reacquainted you with the “adventure” that awaits you, here are a few tips on tax credits that might sweeten the pot for you to consider.
Did anyone in your household attend a higher-education institution and pay tuition in 2013? They might qualify for a credit for as much as $2,500 to offset tax, or if they don’t owe any tax before the credit, $1,000 of the credit may qualify to be refunded anyway.
Consider whether you are qualified for the earned-income credit. It is for folks who earned less than a certain amount (for example, Married Filing Joint-MFJ is $51,567) in 2013. Families with qualifying children (which means you can take them as a dependent on your return) may be eligible for up to $6,044 in a refundable credit. You must file a tax return to claim this credit.
Speaking of “qualifying children,” if you have any and they are still younger than 17, you might be able to receive an additional child tax credit of $1,000 per child. If you do not have enough tax to offset this credit against, some might even be available as a “refundable credit.” The “bad news” is that if you have MFJ adjusted griss Income over $110,000, this credit begins to phase out.
Want help from Uncle Sam in saving for your retirement? If your adjusted gross income is less than $36,000 (MFJ) and you made at least a $4,000 contribution to an IRA (Individual Retirement Account), on top of reducing your taxable income by $4,000, you might be able to take a 50 percent “savers credit” against your tax owed up to $2,000. Assuming you are in the 10 percent tax bracket, that means you have a $4,000 contribution to an IRA that you only had to pay $1,600 out of your pocket for. It starts phasing out if your income is higher than $36,000 and is gone if your income is higher than $60,000. Note: If you are filing differently than MFJ, the income limits and credits are smaller.
There are many other things to consider, but hopefully, this has whetted your appetite to start in on the gourmet event of preparing your 2013 tax return. Bon appétit! (P.S. You may want to turn off your GPS unit while preparing your return to avoid additional confusion.)
Kelly Bullis is a certified public accountant in Carson City. Contact him at 775-882-4459, online at BullisAndCo.com or on Facebook.