Investment Income and EITC

The EITC is meant to help taxpayers of modest means support themselves. There are certain limits on the amount of un-earned income or investment income that a taxpayer may have to claim the EITC.

Investment Income and EITC

Income from investments, whether it is dividends, rental properties or inheritance, disqualify you from the EITC if you a have over $ 3,200 in a year. This would most likely be the types of things that are reported on a Form 1099. Other disqualifying income are child support, retirement, Social Security benefits, unemployment benefits and alimony. The benefits received for work in prison do not count toward the credit. There are special EITC rules for members of the military, ministers, members of the clergy and those receiving disability benefits. Find out more about the special EITC rules.


Combat Pay Rules for IRS Purposes and EITC

You do not have to report your nontaxable pay you receive as a member of the Armed Forces as earned income for EITC. Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). The amount of your nontaxable combat pay is on your Form W-2, in box 12, with code Q.

But, you and your spouse can each choose to have your nontaxable combat pay included in your earned income for EITC. Including it as earned income may decrease the amount of tax you owe and may mean a larger refund. Calculate your taxes with the combat pay as earned income and without to find out what’s best for you.


Investment Income and EITC

If you make the election, you must include in earned income all nontaxable combat pay you received. You can’t choose to include only a part of the nontaxable combat pay in earned income. That is,

  • You can choose to include all your nontaxable combat pay and your spouse can choose zero
  • You can choose to include zero amount of your nontaxable combat pay and your spouse can choose to include all of it
  • You can both choose to include all your nontaxable combat pay
  • You can both choose not to include your nontaxable combat pay

Some disability retirement benefits qualify as earned income to claim EITC. Also, you may claim a relative of any age who is totally and permanently disabled and fits all other eligibility  requirements.

Information about the $7500 Electric Vehicle Tax Credit

There are several incentives from the IRS to buy an electric vehicle right now.

A tax credit is available for the purchase of a new qualified plug-in electric drive motor vehicle that draws propulsion using a traction battery that has at least five kilowatt hours (kWh) of capacity, uses an external source of energy to recharge the battery, has a gross vehicle weight rating of up to 14,000 pounds, and meets specified emission standards. The minimum credit amount is $2,500, and the credit may be up to $7,500, based on each vehicle’s traction battery capacity and the gross vehicle weight rating.


Basic Summary of the Electric Vehicle Tax Credit

  • If your total tax liability is $7500 or more after all your deductions and other credits, IRS would refund you the $7500.
  • If your total tax liability is less that $7500 after all your deductions and other credits, IRS would refund you up to your tax liability.
  • Tax liability is the net income tax you owe IRS.
  • If you are married and filing jointly, and your taxable income is over $73,000, you are more likely to make full use of the credit.

Remember that this is a non-refundable credit. Meaning that if you owe less than your credit amount before applying it, you will not get to use the entire amount. And it does not carry over.


Information about the $7500 Electric Vehicle Tax Credit

Please note, not all electric cars will qualify for this, and some may only qualify for a partial credit (Dependent on their battery size). For example, the Toyota Prius plugin hybrid only qualifies for $2,500, and the Ford Fusion or C-Max only receive $4,007.

This tax credit applies to vehicles acquired after December 31, 2009. For more information, see the Internal Revenue Service (IRS) Plug-In Electric Vehicle Credit website and IRS Form 8936, which is available via the IRS Forms and Publications website.


Qualified Plug-In Electric Drive Motor Vehicle Credit (IRC 30D) Credit Phase Out

The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”). Several manufacturers have begun selling cars very close to the limit. It is always best to check with a car dealer before making the sale if the vehicle will qualify for the incentive. Also remember, that some states may have additional tax credits for electric and energy efficient vehicles. It will be worth a taxpayers to check into these state energy efficient tax credits.

Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period.  Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period.

Home Energy Credit For 2014 Taxes

You may be able to reduce your taxes if you made certain energy-efficient home improvements last year. Here are some key facts that you should know about home energy tax credits. There is one energy tax credit available for Tax Year 2014, which is called the Residential Energy Efficient Property Credit. The Nonbusiness Energy Property Credit expired on December 31, 2013. However, Congress extended this credit until December 31, 2014. Therefore, you can claim it on your 2014 Tax Return. In future tax years, you can always go back and refile your tax return if you find out that you should have claimed the energy credit for qualified expenses.


Energy Property Credit for Non- Business Uses

  • This credit is worth 10 percent of the cost of certain property that you added to your main home to save energy last year. This includes items such as insulation, windows, doors and ceilings.
  • You could also claim credit for the actual cost of a good. This may include items such as water heaters and heating and air conditioning. Each property type has a different limit for the money you can claim with the energy credit.
  • This energy property credit has a lifetime limit of $ 500. You may only use this $ 200 limit for windows on a home
  • The taxpayer’s main home must be located in the U.S. to qualify for the credit.
  • Make sure you have written certification from the manufacturer that his product meets the requirements for this tax credit. Usually they publish on its website or included with the product package. You can trust the information provided by the manufacturer to claim the energy credit, but do not attach this information to your return. Keep with your tax records in case the IRS has an audit and investigates your deductions for the energy tax credit.
  • This credit expired at the end of 2013. Taxpayers could till claim the credit on their 2013 tax return if they did not reach the lifetime limit in previous years.


Credit for Energy Efficiency of Residential Property

  • This tax credit is 30 percent of the cost of alternative energy equipment installed in your home.
  • Qualified equipment includes solar water heaters, solar electric equipment and wind turbines.
  • There is no limit on the amount of credit available for most property types. If your credit is greater than the tax due, the excess can claim this credit on the tax return next year.
  • The house must be in the U.S. This has to be your main home.
  • This credit is available through tax 2016.

Use Form 5695 , Residential Energy Credits, to claim these credits. For more on this, see the form instructions. You can obtain Form 5695 on or by calling 1-800-TAX-FORM (800-829-3676).


Additional IRS Resources on Energy Credit

March 31 Health Insurance Deadline and Taxes

For most people, the Affordable Health Care Act does not affect income tax returns for 2013 that they are filing in 2014. However, some people may have to make important decisions for the March 31, 2015. The deadline for open enrollment. This could affect a penalty that they file on their 2014 tax returns if they do not have health insurance coverage. It is essential to file these taxes correctly 2013 onward. 


Learn about Health Care Law

Here are five things about the health care law you should consider when filing your taxes and making decisions about what kind of insurance coverage you will purchase. 


March 31 Health Insurance Deadline and Taxes

Are you Currently Insured? No Change: If you are currently insured, you do not need to do anything to keep your current insurance coverage under the health care law.

Is not Insured – Register for March 31: The open enrollment period to buy health insurance coverage through the Health Insurance Market for 2015 continues through March 31, 2015 When you get health insurance through the market. , you may have advance payments of  the premium tax credit to help you reduce your monthly premiums immediately available. The health insurance premium tax credit could change throughout the year depending on personal circumstances and may be different by the time you file taxes.

Insurance Premium Tax Credit to Reduce Your Monthly Payments:  If you get insurance through the market, you may be eligible to claim the premium tax credit. You can choose to advance payments of the tax credit to be sent directly to your insurer during 2014, or wait to claim the credit when filing your tax return in 2015. If you choose to advance your insurer payments are shipped, you will have to reconcile payments on your 2014 tax return, which will be presented in 2015. If you are already receiving advance credit payments will not have to do anything at the moment unless there is a change in your circumstances.

Changing Circumstances: If you are receiving advance payments of the premium tax credit to help pay for their health insurance coverage, you should report changes in your life, such as changes in income, marital status or family size , Health Exchange Market. Report changes will help ensure you are getting the right amount of advance payments of the premium tax credit. This will eliminate most surprises during tax time.

Shared Responsibility Payments for Individuals: From January 2014, you and your family have had the requirement to have health insurance coverage or have an exemption from coverage. Most people already have qualified health insurance coverage. These people will not have to do anything but keep that coverage throughout 2014. If you can afford coverage but choose not to buy it and remain uninsured, you might have to make a payment of shared responsibility for individuals who file their taxes in 2015.


HCA Health Insurance Premium Tax Credit

The Health Insurance Premium Tax Credit can help purchase health insurance coverage more affordable for people with moderate incomes. To be eligible for the health insurance tax credit, generally must meet three rules. First, you need to get your health insurance coverage through the Health Insurance Market. The open period for the purchase of health insurance coverage by 2014 through the Health Insurance Market which has open enrollment between  1 October 2013 to 31 March 2014.


Household Income Amounts for Health Care

Second, the household income must be within the range between one and four times the federal poverty line. For a family of four for the tax year 2014, that means revenue of $ 23,550 to $ 94,200. There are charts available from the IRS to help determine what amount a health premium tax credit that someone is eligible for.

Third, you may not be eligible for other coverage, such as Medicare, Medicaid or employer coverage that is sufficient under the health care laws and meets minimum coverage requirements.

If a market determines you probably qualify for the tax credit at the time of registration, you have two options:

  1. You can choose which part or all of the estimated credit is paid in advance directly to your insurance company to reduce what you have to pay of-pocket for their monthly premiums during 2014.
  2. Or, you can expect to get all the credit when you file your 2014 tax return in 2015.

If you wait to get the credit, this health insurance credit may increase a refund or reduce your balance due.


Elect Health Insurance Premium Tax Credit

If you elect to receive the credit in advance, changes in income or family size affect the credit for which you are eligible to receive. If the credit on the tax return you file in 2015 does not match the amount received in advance, you will have to repay any overpayment in advance, or you can get a bigger refund if you are entitled to more. It is important to tell your  health insurance mark about changes in income or family size as they occur during 2014 because these changes affect the amount of your credit.


HCA Health Insurance Premium Tax Credit

If there is a change in credit, be sure that you have funds on hand in order to payback any credit that you are not eligible for. This may be better than getting a surprise tax when you file in April.

Tips for Filing Taxes as an American Abroad

There are many special rules that expats must consider when filing their income taxes with the IRS. If you are a U.S. citizen or resident, you must report income from all sources within and outside the United States.


Tips for Filing Taxes as an American Abroad

The rules for filing tax returns are generally the same if you are living in the United States or abroad. Here are seven tips from the IRS that U.S. taxpayers with income from abroad should know:


American Expat Tax Tips

  1. Declare Worldwide Income . The law requires U.S. citizens and resident aliens to report any income from abroad. This includes income from trusts and bank accounts and securities abroad. New laws such as FATCA will ensure that the IRS can find out if taxpayers are hiding information about foreign bank accounts. This even applies to expats who are working jobs and living abroad.
  2. Present Tax Forms Required. Expat might need to file Schedule B, Interest and Ordinary Dividends, with your tax return in the United States. You will also need to submit the Form 8938 , Statement of Foreign Financial Assets specifics. In some cases, you need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts.
  3. Consider an Automatic Extension.  If you are living abroad and can not file your return by the deadline of April 15, you may qualify for an automatic extension of two months. Then you have until June 16, 2014 to file your tax return in the United States. This extension also applies to those serving in the armed forces outside the United States. You must attach a statement to your tax explaining the reason why you qualify for the extension declaration.
  4. Check Income Exclusion Foreign Coming. If you live and work abroad, could claim the exclusion of foreign earned income foreign earned income exclusion . If you qualify, you pay taxes up to $ 97.600 in their wages and other income from abroad in 2013. See Form 2555 , Foreign Earned Income, or Form 2555-EZ , Foreign Earned Income Exclusion, for details.
  5. Do not Ignore the credits and deductions. You could take a credit or deduction for taxes paid to a foreign country. These benefits can reduce the amount of taxes you must pay if both countries will charge you taxes on the same income.
  6. Get Tax Help Outside the U.S. The IRS has offices in Frankfurt, London, Paris and Beijing. IRS staff in these offices can help with tax filing issues and answer your tax questions.

Tax Credit For Health Insurance Premiums

What kind of tax credit do you get for health insurance premiums?

From 2014, if you obtain health insurance coverage through the Health Insurance Market, you may be eligible for the premium tax credit. This tax credit can help purchase health insurance coverage more affordable for people with moderate incomes. The open enrollment period to buy health insurance coverage for 2014 through Market begins October 1, 2013 to March 31, 2014.


Tax Credit For Health Insurance Premiums

If you buy health insurance through your state’s health insurance Marketplace, also called an Exchange, you may be able to get some financial help. The health care reform law helps lower the cost of health insurance for families with low to moderate incomes who make too much money to qualify for Medicaid. There are two main types of financial help: premium tax credits and cost-sharing subsidies. The amount of tax credit you qualify for depends on your income and the size of your family. In addition, households with lower incomes may qualify for subsidies to help lower the cost of doctor visits, hospital stays, and other types of medical care.


Eligibility Requirements for Health Insurance Tax Credit

Usually, you may be eligible for the credit if all of the following:

  • purchase health insurance through the Market;
  • is not eligible for coverage through an employer or government program;
  • is within certain parameters of income;
  • filing a joint return, being married, and
  • can not be claimed as a dependent by someone else.


If you are eligible for the credit, you can choose:

  • Get It Now: all or part of the estimated credit may be prepaid directly to your insurance company to reduce the amount you pay out of pocket for your monthly premiums during 2014, or
  • Get It Next: wait to receive all the credit when filing their 2014 tax return in 2015.


To qualify for the credit, you must get their insurance through the ObamaCare Market .

During enrollment through the market, using the information you provide about your expected income and family composition in 2014, the market will calculate the amount of tax credit bonus you can claim for tax year 2014 you be presented in 2015.

Then you decide if you want the total, part or none of their estimated credit is paid in advance directly to your insurance company.

For any tax year, if you receive any amount for advance payments of the credit, or if you claim the premium tax credit, you must file a federal income tax on income for the year.


Health Care Premium Tax Credit Information

If you choose to get it now: When you file your 2014 taxes in 2015, you subtract the total of advance payments received during the year the amount of the premium tax credit calculated on your tax return. If the premium tax credit calculated on your return is more than the advance payments have been made ​​on your behalf throughout the year, the difference will increase your refund or reduce the amount of tax you owe. If advance payments of the credit is more than the premium tax credit, the difference will increase the amount you owe and will result in either a smaller refund or balance due.

If you choose to get it later: You claim the full amount of the premium tax credit when filing your 2014 taxes in 2015. This will reduce your refund or increase your balance due.


Income for Health Care Credit Eligibility 2015

You may be eligible for a tax credit if the amount of money you expect to make for all of 2015 is in the following income ranges:

  • $11,670 to $46,680 for one adult
  • $15,730 to $62,920 for a family of 2
  • $19,790 to $79,160 for a family of 3
  • $23,850 to $95,400 for a family of 4


When to Notify Health Insurance Marketplace

Notifying the Marketplace about changes in circumstances will allow the Marketplace to update the information used to determine your expected amount of the premium tax credit and adjust your advance payment amount. This adjustment will decrease the likelihood of a significant difference between your advance credit payments and your actual premium tax credit.


Changes in circumstances that can affect the amount of your actual premium tax credit include:

  • Increases or decreases in your household  income.
  • Marriage.
  • Divorce.
  • Birth or adoption of a child.
  • Other changes to your household composition.
  • Gaining or losing eligibility for government sponsored or employer sponsored health care coverage.

College Education Credits and 529 Plans Qualified Tuition Programs

Can you use a qualified tuition program (529 Plan) and claim education tax credits?

States sponsor 529 plans — qualified tuition programs authorized under section 529 of the Internal Revenue Code — that allow taxpayers to either prepay or contribute to an account for paying a student’s qualified higher education expenses. 529 plan distributions are tax-free as long as they are used to pay qualified higher education expenses for a designated beneficiary. Qualified expenses include tuition, required fees, books and supplies. For someone who is at least a half-time student, room and board also qualify.


What are Qualified Tuition Expenses?

A student or the student’s parents may claim an education credit for qualified tuition and related expenses paid by or with funds from a QTP, provided the other eligibility requirements are met. However, an individual’s qualifying higher educational expenses must be reduced by tax-free education benefits  plus the amount of the qualifying expenses taken into account in computing an education credit. The amount taken out would normally be things such as scholarships and employer-provided education assistance.


Coverdell ESA

Also remember, if there is a balance in the Coverdell ESA when the beneficiary reaches age 30, it must generally be distributed within 30 days. The portion representing earnings on the account will be taxable and subject to the additional 10% tax. The beneficiary may avoid these taxes by rolling over the full balance to another Coverdell ESA for another family member.


More Information about Coverdell Education Savings Accounts

For more information, see Tax Tip 2008-59, Coverdell Education Savings Accounts.

Information about Filing Amended Tax Return

If you discover an error on your tax return after you have filed your return, you may need to amend your return. The IRS may correct mathematical errors and may accept a statement which they told some forms or missing schedules. In such cases, no amendment is needed. However, a taxpayer must file an amended return if you have to make a change in your filing status of the return, your income, deductions or credits.


Amending Return with Form 1040X

Use Form 1040X , Amended U.S. Individual Income Tax Return (amended Declaration federal personal income tax in the United States), to correct the Form 1040 , the Form 1040A , the Form 1040EZ , the Form 1040NR or Form 1040NR-EZ . If you are filing to claim an additional refund, wait until you receive your original refund (you may cash that check). If you owe additional tax for a tax year in which the expiration date has not elapsed to file, file Form 1040X and pay the tax to the date of submission for that year to avoid interest and penalties. If the filing due date falls on a Saturday, Sunday or legal holiday, the due date is postponed to the next working day. Theinstructions for Form 1040X provides a list of the addresses of the IRS service centers.


File 1040X Each Tax Year Being Amended

File a Form 1040X for each year separately that amendment. Mail each form in a separate envelope. Be sure to indicate the year amending at the top of Form 1040X. The form has three columns. Column A shows original or adjusted amounts of original statement. Column C shows the corrected amounts. The difference between Column A and Column C appears in Column B. There is a space in the back of the form where the changes made and the reason for the change are explained. Attach any forms or annex that has been affected by every change made. Generally, to claim a refund, you must file Form 1040X within three years from the filing date of the original or within 2 years from the date you paid the tax return, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the date of maturity.


Information about Filing Amended Tax Return

  • Attach copies of all schedules or forms that have been changed as a result of the amendment, including any Forms W-2 received after the original return was filed.
  • You can get tax forms by calling 1-800-829-3676 or visiting the website , in English.
  • An amended tax return can not be filed electronically using the e-file system.
  • Normal processing time for Forms 1040X is 8 to 12 weeks from the date of receipt of the IRS.

Warning: Your state tax liability may be affected by a change made ​​to your federal return. For more information on how to correct the state income tax, contact your state tax agency .

Form 1099-A, Acquisition or abandonment of secured property

Form 1099-A, Acquisition or Abandonment of Secured Property (Acquisition or abandonment of secured property), and Form 1099-C, Cancellation of Debt (debt cancellation)

If you get a loan from a lender to purchase a property, the lender may require that the loan is guaranteed with the acquired property. If you transfer an interest in the secured property to the lender (as in a foreclosure) or abandons the property, you may be required to treat the transfer or abandonment as a sale of the property. If the lender acquires an interest in secured property or has reason to know that you left the secured property, or failed to use it permanently, the lender should send you a Form 1099-A.


IRS Form 1009-C

When you borrow money, it is not necessary to include the loan proceeds in gross income, as it has the obligation to repay the lender later. If that obligation is subsequently canceled, you may be required to include the amount of canceled debt in your gross income. A commercial lender cancels a debt issue a Form 1099-C, Cancellation of Debt (debt cancellation), in English, to declare the cancellation.


IRS Form 1009-A

On Form 1099-A, the lender states the amount owed (principal only) and the fair market value of the secured property. You, who is the debtor uses these values ​​to determine whether you have a gain or a loss to dispose of the property. On the Form 1099-C, the lender declares the amount of debt canceled. If the acquisition of an interest in secured property lender (or abandonment of the property by the debtor) and debt cancellation occur in the same calendar year, the lender may only issue a Form 1099-C. See Topic 431 , which contains additional information on the Form 1099-C.

Form 1099-A, Acquisition or abandonment of secured property

If you receive a Form 1099-A or Form 1099-C and the information is incorrect, contact the lender to make the necessary corrections. For more information about foreclosures and abandonments, seePublication 544 , Sales and Other Dispositions of Assets (Sales and other disposals of assets).


IRS Publications on Cancellation of Debt

In some situations, you can exclude income from the total or partial cancellation of a debt. For example, if you have income from the cancellation of debt on their principal residence, you may exclude from income canceled part of the amount or the full amount. For more information, see Publication 4681 , Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals) (Cancelled Debts, Foreclosures, Repossessions and dropouts (for individuals)) and Instructions for Form 982 , Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) (Decrease of tax attributes due to the release of debt (and the adjustment to the basis under section 1082)).