Surprised By the Kiddie Tax??

To prevent parents from placing investments in their children’s names to take advantage of the child’s lower tax rate, Congress created, several years back, what is referred to as the “Kiddie Tax”. Under the Kiddie Tax, a child’s investment income in excess of $1,900 is taxed at the parent’s tax rate rather than the child’s. These rules do not apply to married children who file a joint return with their spouse or self-supporting children. Depending upon your circumstances, this can be either a tax return preparation nuisance or a penalty tax...

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Can You Write Off a Bad Debt?

Most small businesses have receivables that cannot be collected. These receivables can be from the sale of products, providing services to customers, or a combination of the two. Whether or not a bad debt deduction will apply generally depends upon which accounting method is used (either the cash or accrual method). Why does this make a difference? Let’s look at what happens under both methods of accounting. Accrual – If the accrual method is used, all of your billings must be treated as income whether or not they have been collected. This means...

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100 Percent Write-Off for Qualified Leasehold Improvements

In an effort to get the economy back on the rails again, the 2010 Tax Relief Act permits businesses to claim a 100% depreciation deduction (100% bonus depreciation allowance) in the year that qualifying assets are placed in service. Qualified leasehold improvements clearly are eligible for this special 100% write-off. Bonus depreciation basics - In general, a leasehold improvement qualifies for the 100% bonus depreciation allowance if it is acquired and placed in service after Sept. 8, 2010 and before Jan. 1, 2012, and the original use of the...

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Read This Before Tossing Old Tax Records

Now that your taxes have been completed for 2010, you are probably wondering what old records can be discarded. If you are like most taxpayers, you have records from years ago that you are afraid to throw away. It would be helpful to understand why the records needed to be kept in the first place. Generally, we keep “tax” records for two basic reasons: (1) in case the IRS or a state agency decides to question the information reported on our tax returns, and (2) to keep track of the tax basis of our capital assets so that the tax liability can...

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Is Your Credit Rating Correct?

Why do you care? Well for starters, people with a better credit rating enjoy significantly lower interest rates that can add up to thousands of dollars less in interest payments over the term of the loan. For example, a fixed 30-year mortgage payment varies with respect to credit score and the interest rates corresponding to the credit score. Having a score that is two hundred points higher can offer a savings of $448 a month for the same $200,000...

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Two Tax Credits to Help Pay Higher Education Costs

There are two federal tax credits available to help individuals offset the costs of higher education for themselves or their dependents. They are the American Opportunity Credit and the Lifetime Learning Credit. To qualify for either credit, a taxpayer must pay post-secondary tuition and fees for themselves, their spouse or their dependent. The credit is claimed by the individual who claims the student as a dependent, even if someone else pays the tuition including the student. However, if the student is not claimed as a dependent of another,...

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