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Tax Information
- Home Equity DeductionIs interest on a home equity line of credit deductible as a second mortgage?
You may deduct home equity debt interest, as an itemized deduction, if you are legally liable to pay the interest, pay the interest in the tax year, secure the debt with your home, and do not exceed certain limitations. For more information, refer to Publication 936 , Home Mortgage Interest Deduction; and Tax Topic 505 , Interest Expense. - Nursing Home DeductionMy father is in a nursing home and I pay for the entire cost. Can I deduct the expenses on my tax return?
You may deduct qualified medical expenses you pay for yourself, your spouse, and your dependents, including a person you claim as a dependent under a Multiple Support Agreement. You can also deduct medical expenses you paid for someone who would have qualified as your dependent for the purpose of taking personal exemptions except that the person did not meet the gross income or joint return test.
Nursing home expenses are allowable as medical expenses in certain instances. If you, your spouse, or your dependent is in a nursing home, and the primary reason for being there is for medical care, the entire cost, including meals and lodging, is a medical expense. If the individual is in the home mainly for personal reasons, then only the cost of the actual medical care is a medical expense, and the cost of the meals and lodging is not deductible.
You deduct medical expenses on Form 1040, Schedule A (PDF) , Itemized Deductions. The total of all allowable medical expenses must be reduced by 7.5% of your Adjusted Gross Income. For more information, refer to Publication 502 , Medical and Dental Expenses.
- Alimony DeductionsCan I deduct alimony paid to my former spouse?
If you are divorced or separated, you may be able to deduct the alimony or separate maintenance payments that you are required to make to your spouse or former spouse, or on behalf of that spouse. For additional information, refer to Tax Topic 452 , Alimony Paid (this topic covers alimony under decrees or agreements after 1984); and Publication 504 , Divorced or Separated Individuals
- Used Car DonationI donated a used car to a qualified charity. I itemize my deductions, and I would like to take a charitable contribution for the donation. Do I need to attach any special forms to my return? What records do I need to keep?
If you claim a deduction on your return of over $500 for all contributed property, you must attach a Form 8283 (PDF), Noncash Charitable Contributions, to your return. If you claim a total deduction of $5,000 or less for all contributed property, you need only complete Section A of Form 8283 (PDF). If you claim a deduction of more than $5,000 for an item or a group of similar items, you generally need to complete Section B of Form 8283 (PDF) which requires, in most cases, an appraisal by a qualified appraiser.
You will need to obtain and keep evidence of your car donation and be able to substantiate the fair market value of the car. If you are claiming a deduction of $250 or more for the car donation, you will also need a contemporaneous written acknowledgement from the charity that includes a description of the car and a statement of whether the charity provided any goods or services in return for the car and, if so, a description and estimate of the fair market value of the goods or services.
For more information on these requirements, refer to Publication 526, Charitable Contributions; Publication 561, Determining the Value of Donated Property; Form 8283, Noncash Charitable Contributions, and its instructions; and Tax Topic 506, Contributions. - Lifetime Learning CreditWhat is a Lifetime Learning Credit?
A nonrefundable tax credit up to a certain dollar amount per family for all undergraduate and graduate level education. The Lifetime Learning Credit is calculated by taking a percentage of the qualified educational expenses paid. This information is found in Publication 970, Chapter 3.
- Qualifing Educational Expense CreditsWhat expenses qualify for the education credits?
Expenses that qualify are tuition and fees required for enrollment or attendance at any college, vocational school, or other post-secondary educational institution eligible to participate in the student aid programs administered by the Department of Education.
Qualified expenses do not include books, room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses. The cost of books and equipment are generally not qualified expenses because eligible educational institutions usually do not require that fees for such books or equipment be paid to the institution as a condition of the student's enrollment or attendance at the institution.
- Deducting Interest on Student LoansWhat are the limits for deducting interest paid on a student loan?
The maximum deductible interest on a qualified student loan is $2,500 per return. If you are a taxpayer whose return status is married filing jointly, you are allowed to deduct the full $2,500 only when your modified adjusted gross income (MAGI) is $100,000 or less. If your MAGI is more than $105,000, but less than $135,000, the amount of your student loan interest deduction is gradually reduced. The instructions for Form 1040 (PDF) show you how to compute the deduction. If your MAGI is $135,000 or more, you are not able to take any deduction.
For those whose filing status is single, head of household, or qualifying widow(er), the full $2,500 deduction is allowed for MAGI levels equal to or below $50,000. For MAGI between $50,000 and $65,000, the deduction amount is gradually reduced. The Form 1040 Instructions show you how to compute the deduction. If your MAGI amount is $65,000 or more, there is no deduction.
There is no deduction if you file as married filing separately, if you are claimed as a dependent, or if the loan is from a related party or a qualified employer plan. For more information, refer to Publication 970, Tax Benefits for Education, Chapter 4; Tax Topic 505, Interest Expense; and Tax Topic 513, Educational Expenses .
- Deductible Educational Expenses
What types of educational expenses are deductible?
Deductible educational expenses include amounts spent for tuition, books, supplies, laboratory fees, and similar items. They also include the cost of correspondence courses, as well as formal training and research you do as part of an educational program. Transportation and travel expenses to attend qualified educational activities may also be deductible. For more information, refer to Publication 970, Tax Benefits for Education; Chapter 12 and Tax Topic 513, Educational Expenses.
- Paying Child SupportIf you pay child support, are you allowed to deduct anything on your taxes or claim the child as an exemption?
Nothing can be deducted for the child support payments. Child support payments are neither deductible by the payer nor taxable income to the payee. You may be able to claim the child as a dependent. The parent who the child lived with for the greater part of the year is the custodial parent. Generally the custodial parent is allowed to claim the exemption for the child if the other exemption tests are met. However, the noncustodial parent may be allowed to claim the exemption for the child if the custodial parent signs a Form 8332 (PDF), Release of Claim to Exemption for Child of Divorced of Separated Parents, or a substantially similar statement.
- Claiming DependentsMy husband and I have provided a home for my niece and her son for the past seven months. She receives no child support from her ex-spouse, and she does not work or have any income of her own. Can I claim her and her son as dependents?
Under a new law effective with tax years beginning after December 31, 2004, your niece and her son would qualify as your dependents as your qualifying children if your niece and her son--
1. Are the children or grandchildren of your brother or sister,
2. Have not attained the age of 19 (or 24, in the case of full-time students) by the close of the calendar year in which your taxable year begins,
3. Had the same principal place of abode as you for more than 1/2 of your taxable year, and
4. Have not provided 1/2 of their own support during the calendar year in which your taxable year begins.