Tax Planning For Your Student Loan Interest Deduction

JC Leahy

Between parents and students, there is a danger of letting the student loan interest deduction slip through your fingers.  Here's the problem.  You must meet all of the following basic conditions to claim the deduction:

• You must be obligated the pay the interest and
• You must pay the interest and
• The loan must have been for your college education or that of someone who was your dependent at the time the debt was incurred.

You have to meet all 3 criteria.  This presents all kinds of horrible possibilities.  For example, you have a dependent college student who takes out Sallie Mae loans and you make the required loan payments.  You can't take the deduction if  because the STUDENT is obligated to pay, NOT YOU.  That's a disappointment.  What's worse is that the student can't claim the deduction either, because he didn't pay -- you did.   Therefore, neither you nor your student meet all 3 of the above criteria.

Another scenario: Suppose you took out a Plus loan for you child's eduction, but he wasn't your dependent at the time.  You are definitely obligated to pay the student loan with interest, and you indeed pay.  However, since the student wasn't you dependent at the time you took the loan out,  neither you nor the student meet all 3 of the above criteria and neither can claim the deduction.

So be careful planning your student loan interest tax deduction !!

Here's a link for further reading.

Tax Planning for your Business Startup Expenses

JC Leahy

If your business began in 2012, you can elect to deduct up to $5,000 of start-up costs paid or incurred after October 24, 2004, and before and after 2010, and up to $10,000 of start-up costs paid or incurred in 2010. The $5,000 limit is reduced (but not below zero) by the amount by which your total start-up costs exceed $50,000 and the $10,000 limit is reduced (but not below zero) by the amount by which your start-up costs exceed $60,000. Start-up costs which are not deductible are amortizable over a 15 year period.

Deducting Mortgage Insurance Premiums

JC Leahy

In January, 2013, the American Taxpayer Relief Act extended the provision regarding Mortgage Insurance Premium deductibility for the 2012 tax reporting year.  If there is an amount in Box 4 of the Form 1098 your receive from your mortgage bank, the provision applies to you. 

Home Office Deduction 2012 in a Nutshell

Question from Janice in Chicago:

Hello John:

Happy Tax time. Hope this finds you doing well.

I am preparing my tax info to send to you. Just to be sure I have everything, what do I need to send regarding business or home office. I am not sure what is deductible now or if there are changes.  Thank you. Janice

Answer:

Hi Janice!!!

There are no big changes regarding home office.  If it's an employee home office, it essentially needs to be required by your employer.  If it's a business home office, it generally should be your main place of business.  In either case, the home office needs by be physically separated from the rest of the house - as by a wall or partition -- and used exclusively for business.  I will need to know the size of the office relative to the overall size of the whole residence.  You can measure office and home either size by square footage or by number of rooms.  Data required include total cost of the house, date of purchase, and all the home expenses that benefit both home and office -- such as heating, aircon, condo fees, snow removal, trash pickup, water, sewer, homeowners insurance, landscape and yard maintenance, repairs, etc, etc.  Also any expenses that benefit only the  home office -- such as painting, carpeting, cleaning, etc.

JC Leahy, MA Accounting
TaxHelpWhenYouNeedIt.com

 

W-2 Box 14 Codes for Defense Finance and Accounting Service

JC Leahy
MA Accounting

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If you are a Federal civilian employee, your W-2 may have been printed by the Defense Finance and Accounting Service.  You will be able to tell just looking at the employer's name on the W-2.  For example, if you work for the Department of Veterans Affairs, your W-2 employer will be shown as "Defense Finance and Actg Srv, Agent for Dept of Veterans Affairs, 1240 E 9th Street, Room 1907, Cleveland, OH  44199." 

Box 14 of your W-2 may contain codes and dollar numbers.  You will need to interpret them.  Here are the meanings:

P = Employer provided vehicle
C = Moving expense
G = Non-taxable benefits identified as Pre-Tax Transportation Equity Act
H = Home to work transportation fringe benefits
K = Non-taxable dental and vision deductions
U = Non-taxable fringe benefits
V = Non-taxable health benefits
X = Occupational Tax (civilian)
Y = Non-taxable Flexible Spending Accounts
Z = Massachusetts Retirement

  Eight reasons to file your income taxes early !!

How Did YOU Deal With Hurricane Sandy??

I'm sitting here early Tuesday morning in my bathrobe with poached eggs, English muffins with cherry-apple butter, and coffee with the fireplace burning brightly -- feeling like I made a great decision to stay home today and wait out Hurricane Sandy's  foul weather!  Despite dire warnings from PEPCO, I haven't lost electrical power  here in  Silver Spring, Maryland.

On the other hand, we just bought a waterside beach house in Delaware a few weeks ago.  I hope its still there.  What a time to decide to buy a beach house  :(

How did YOU deal with Hurricane Sandy? 

JC Leahy
October 30, 2012

Next-Day Update:  Hurricane Sandy is over!!! My house was apparently in a lucky place. No electricity lost and no trees in the yard down, even though Route 29 had to be closed for some reason ( I wonder why??) and some people I know lost power. I just hope my Delaware beach house is undamaged -- it's at the waterside, on one of those canals.   I hope it's still there!!! :)  JL

Obama Quote of the Decade - With Re-Election Poster

The Quote of the Decade:
"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America 's debt weakens us domestically and internationally. Leadership means that, "the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."
~ Senator Barack H. Obama, March 2006 - Pass it on until election day!!

This Re-Election poster would make a great desktop background on your PC at home and at work!