Tax season is here and with every tax season comes a lot of great tax questions.
Here are some of the most common tax questions from job seekers, parents, baby boomers, and homebuyers this tax season:
1. Job Seekers-With an average unemployment rate of 9.7%, millions of Americans were hunting for a new job in 2011. If you were one of them, your job search, moving expenses, and home office expenses might be tax deductible.
- Can I deduct the cost of searching for a job? All those resume copies, employment, outplacement agency fees, career seminars, and even business related travel might be deductible if you were looking for a new job.
- Are moving expenses for my new job tax deductible? Moving expenses related to a new job may be tax deductible if you meet the distance and time test.
- Are unemployment benefits taxable? Many people are asking if the first $2,400 of unemployment income is tax free, however that tax benefit expired December 31, 2010.
- I started my own business, can I deduct my home office expenses? Many entrepreneurs are hesitant to write off the business use of their home, however there are many deductions they can take advantage of and shouldn’t miss out on.
2. Parents- Being parents can be hard work and costly. Whether you have new additions to the family, college-bound students or kids in day care, at tax time you might be getting a little extra money back in your pocket.
- Who qualifies as a dependent? This is one of our most frequently asked questions today, due to the changing dynamics of relationships. Many taxpayers are surprised to find out who qualifies as a dependent.
- What are qualified education expenses? The U.S. government provides incentives, in the form of education tax credits and deductions, to help decrease the economic impact of pursuing a college education. If you paid eligible education expenses for you, your spouse, or your dependent, you may qualify for one of these tax benefits.
- Can I deduct the costs of daycare for my children? If you paid for child care, dependent care, or even summer camp so you could work, you may be eligible to deduct 20 to 35 percent of qualifying expenses up to $3,000 for one qualifying individual and up to $6,000 for two our more qualifying individual.
- How do I claim the adoption credit? If you chose to adopt, you may be eligible to take a Qualified Adoption Tax Credit up to $13,360 for qualified expenses associated with the adoption.
3. Baby Boomers – There are 78 million boomers nearing or already enjoying the benefits of retirement, and with these life changes comes common tax questions:
- Is my social security income taxable? Social Security income is not always taxable, however all of your income sources need to be taken into consideration when figuring out how much of your social security income will be taxed.
- How do the new reporting requirements for cost basis impact me? Effective 2011 brokers are now required to include the cost basis of investments sold if they were purchased in 2011 and after. Since this is a new law, you will still be responsible for the cost basis on previous equity purchases that were sold.
- What are the tax implications of taking money out of a retirement account to pay bills/debt? Taking money out of your retirement account to pay off debt may seem like a good idea at the time, but withdrawing from your retirement can be costly. If you haven’t reached the age of 59-1/2, you not only will pay taxes based on your tax bracket, but also an additional 10% tax.
4. Homebuyers/Homeowners -Whether you were were one of the 302,000 new homeowners in 2011 or long-time homeowners, there may be tax deductions available to help offset some of the financial costs of being a property owner.
- What can I deduct in a mortgage refinance? If you have taken advantage of lower interest rates and refinanced your home, you may be able to take a tax deduction for the points paid(loan origination fees) to refinance your home loan.
- What qualified for home energy tax credits in 2011? The Residential Energy Tax Credit was reduced in 2011, however you still may be able to deduct up to $500 for insulation, roofs, and doors.
- How do I repay the 2008 First-Time Homebuyer Tax Credit? If you were lucky enough to receive First-Time Homebuyer Tax Credit in 2008, you were supposed to start repaying the tax credit in 2010 over 15 years through your tax return.
Still have more questions? Don’t worry. TurboTax guides you step-by-step through entering the appropriate information, makes behind the scenes calculations, and puts your tax information on the appropriate tax forms. In addition, TurboTax tax experts are available to provide personalized guidance so that you can be confident you are getting the biggest tax refund and that your taxes are done right.