Going Back to School? Some IRS Tax Relief to Help You

This is school enrollment period again and many Americans have realized that the cost of education is on the rise. According to statistics from the College Board, the average cost of education for 2011 has risen by 4.5% for private colleges and 7% for public universities as compared to 2010. For those of you feeling the pinch of the extra costs of education, it may be a good time to consider the various savings availed through various IRS tax reliefs.

More People Going Back to School

Besides the high costs of education, there also seems to be an increase in the number of people seeking education. The economic downturn and the high unemployment rate had its impact on education. There are many more people enrolling in school than there have been in the past years. People recon that to remain competitive in the employment world, one needs to up their education by adding a certification, degree, or extra training in their field of work. In fact, according to statistics from the Department of Education, there has been more enrollment in educational institutions for people over 35 years of age than there have been for people aged between 18 and 24 between 2008 and 2010. This shows that many people who are already in employment are seeking to harness their skills by taking some extra education. What’s great is that Uncle Sam is providing some help with the costs of education for those going back to school. There are numerous tax reliefs available that can be claimed by those enrolling in school.

Some of the Available Tax Breaks

The different tax breaks available for educational costs cover different aspects of education. The American Opportunity Tax Credit is one of the most claimed relief for those taking undergraduate courses. The tax break provides an annual credit of $2,500 for 4 years of undergraduate education. $1,500 of this amount is non refundable and can only be set off against outstanding tax debt. However, the remaining $1,000 is refundable and one can receive a refund check for this amount. The Lifetime Learning Credit on the other hand, provides a non refundable $2,000 against tuition fees per year per family. The 529 plans are tax sheltered accounts for saving up for education and deposits into these accounts by parents or grandparents are not taxed and do not count under the gift tax rules. Other tax reliefs related to education include a tax deduction for student loan interest, penalty free withdrawals from IRA funds for education and tax free employer provided education.

Tax Breaks and Income Levels

When planning for your taxes, one of the things that a taxpayer needs to keep in mind is the reliefs accessibility is based on one’s income. The different tax reliefs are usually subject to income caps. The American Opportunity Credit is phased out at incomes of $90,000 for single filers and $180,000 for those who file jointly. The Lifetime Learning Credit on the other hand, is phased out at $61,000 for singles and $122,000 for joint filers. The 529 plans do not have a salary cap. If you are on a high income bracket, you can also seek to optimize on reliefs by claiming the reliefs through your children. If a child earns income and provides at least 50% of their educational costs, they may still qualify for tax credits that may be available to the parents.

Bottom line – when it comes to educational related tax relief, it is advisable to get the right information and plan accordingly. If your educational costs are significant, it may be advisable to consult with a tax professional so as to plan your taxes and make the most of the opportunities availed by Uncle Sam.

New Federal Law Provides Income Tax Relief Assistance to Americans in Need

Last year signed into law by President Obama on December 17, 2010 was the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act).

120 Day Extension

As an interest to aid to U.S. Taxpayers who have been contacted by the U.S. Internal Revenue Service, the Federal Government is granting an automatic additional 120 day extension to respond to the IRS inquiries by way of simple written request. This added four month extension to respond without additional tax penalty or accumulating interest will continued to be allowed by way of this Act only through the year 2012.

This added time allows the taxpayer needed reasonable time to retain a Tax Professional: Attorney, Certified Public Accountant (CPA), or an IRS Enrolled Agent (EA) to handle their outstanding income tax issue and comply with the IRS filing requests or payment requests to date. With this Professional Tax Relief engagement the taxpayer can readily have the IRS stop any Wage Garnishments, Account Levies, or Property Liens that may have been locked in place by the U.S. Department of Treasury right away in requesting this 120 extension. Then within this time the Taxpayer can be brought in Compliance with the IRS by simply making outstanding filings without payment at this time, or arrange a payment plan addressing payments due with Tax Penalty Abatement, or seek an Offer in Compromise Settlement based upon ability to pay.

This professional Tax Relief as explained can provide instant monetary relief from IRS, Wage Garnishment, Levies, & Liens and also relieve one from further current collection efforts of the U.S. Department of Treasury- IRS.

Some other aspects of the 2010 Tax Relief Act that addresses the common taxpayer are:

Tax Rates

An Individuals’ taxable income will continue to be subject to six tax rates at 10%, 15%, 25%, 28%, 33% and 35% through 2012 with the expanded 15% bracket for married joint filers that will provide marriage penalty relief is also extended through 2012. Estates’ taxable income will continue to be subject to five tax rates of 15%, 25%, 28%, 33%, and 35% through 2012.

Qualified Dividends Rates & Capital Gains Rates

In addition, the 2010 Tax Relief Act extends the 0 and 15% rates on adjusted net capital gains through 2012. Also extended is the treatment of qualified dividend income as adjusted net capital gain, taxable at the same 0 and 15% maximum rates through 2012. The Act extends the 0 and 15% Alternative Minimum Tax rates on adjusted net capital gains through 2012 as well in less common circumstances.

Employee Payroll Tax Reduction

The employee portion of Social Security taxes has also been reduced from 6.2 to 4.2 percent for 2011 wages only at this time. The employer portion will remain at 6.2 percent. A similar rate reduction applies to the railroad retirement tax as well.

Therefore, if you are someone who is contemplating resolving their debt with the IRS, now the time to take advantage of this added 120 days given by the IRS to resolve your back income tax issues before the end of 2012.

Property Tax Relief Categories That Will Bring Ease To Your Budget

Fortunately there are several forms of property tax relief that can provide a lot of ease during low income periods.
These types of relief fall into different categories and provide tax reductions in different ways.
The different categories of property tax relief address different problems. These categories are:

Property tax relief for senior citizens, property tax relief for first time homebuyer income tax, property tax relief for low income tax payers, property tax relief for individual income tax payers, and property tax relief for long-term owners. Also, there is an exemption for property tax for homestead.

Property Tax Relief For Senior Citizens

Property tax relief for senior citizens makes sense because it protects those who due to retirement have a lower income and thus can’t afford to pay the same taxes than before retiring. The income reduction experienced by most senior citizens and the higher costs on health insurance and other expenses justify this type of relief that provides their budget with some ease.

Property Tax Relief for First Time Homebuyers

Those purchasing a property for the first time usually do so to establish themselves and often start a family. The government in order to provide protection to this particular situation, offers reductions and exceptions on first time homebuyers property tax and rebates or refunds that can be applied to income tax. It also contributes to encourage the construction and home loan businesses.

Property Tax Relief For Low Income Tax Payers

There are also people that have low income even if not retired. For those with a low income there are also tax relief solutions. Just like with senior citizens, people with low income cannot afford high taxes since they need their income to cope with other expenses. Recognizing this fact, the government provides reductions on property tax for those who can show proof of a low income that wouldn’t otherwise let them afford the full tax returns.

Property Tax Relief For Individual Income Tax Payers

Individual Income tax Credit provides those with low income a refund of taxes that includes property tax. This tax credit is one of the most important poverty reduction tools of the country (other countries use it too) as it returns important amounts paid on taxes to those who have low earnings.
There is a high amount of uncollected tax credits from people that either don’t know or won’t take the trouble to fill the forms needed to collect this money.

We always suggest those with low income to resort to non profit organizations that can aid in the process of obtaining Individual Earned Income Tax Credit.

Property Tax Relief For Long Term Owners

Long term owners can obtain reductions on the amount of money they pay for property tax. Regulations defer from one state to another but most of them have some sort of differential taxations between new owners and long term owners. For further information on this issue and all of the above, you should consult with a consultant agency specialized on taxes. There are also non profit organizations that can provide you with assistance and information on these subjects.