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Monthly Newsletter. Rajeev C Hiremath, CPA site will provide you with lot of general information on Taxation as well as Tax Planning ideas, that is appropriate in certain situation.  It has archives dated back to January of 2001.  The editorial content of this site is prepared for us by FSO Technologies as a service to our clients.

You should seek professional advice before implementing any of the strategies discussed herein because of the following:

  • The Strategies are general in nature and will not apply to every situation.
  • Other opportunities may be better suited to your particular needs.
  • The tax laws, rules and regulations are constantly changing.

To contact Rajeev C Hiremath, CPA go to the Contact Us page.  You can either call us or e-mail us through the feedback form.

Weekly Tax Tip

Are You Eligible for a Tax Credit?

Taxpayers should consider claiming tax credits for which they might be eligible when completing their federal income tax returns. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are refundable – taxes could be reduced to the point that a taxpayer would receive a refund rather than owing any taxes. Taxpayers should consider their eligibility for the credits listed below:

 • Telephone Excise Tax Refund is a one-time refund for anyone who paid federal excise taxes for long-distance telephone service billed after Feb 28, 2003 and before Aug 1, 2006. A refund of previously collected telephone excise taxes may be requested on your 2006 federal income tax return. The refund request can be based on the actual tax paid or a standard refund amount ranging from $30 to $60.

 • The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the credit.

• The Child and Dependent Care Credit is for expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work or look for work.

• The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses.

• Adoption Credit: Adoptive parents may qualify for a tax credit of up to $10,960 for qualifying expenses paid to adopt an eligible child. The credit may be allowed for the adoption of a child with special needs even if you do not have any qualifying expenses.

• Credit for the Elderly or the Disabled: This credit is available to individuals who are either age 65 or older or are under age 65 and retired on permanent and total disability, and who are U.S. citizens or residents. There are income limitations.

There are other credits available to eligible taxpayers for which many qualifications and limitations may apply. For more information contact your tax advisor.

Deductible Taxes

Did you know that you may be able to deduct certain taxes on your federal income tax return? The IRS says you can if you file Form 1040 and itemize deductions on Schedule A. Deductions decrease the amount of income subject to taxation. There are four types of deductible non-business taxes:

1.       State, local and local income taxes;

2.       Real estate taxes;

3.       Personal property taxes; and

4.       Foreign income taxes.

The taxpayer has the option to either deduct sales tax or state income tax on Schedule A of the tax return.

You can deduct any estimated taxes paid to state or local governments and any prior year's state or local income tax as long as they were paid during the tax year. If deducting sales taxes instead, you may deduct actual expenses or use optional tables provided by the IRS to determine your deduction amount, relieving you of the need to save receipts. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the mount paid to the general sales tax rate.

Taxpayers will check a box on Schedule A, Itemized Deductions, to indicate whether their deduction is for income or sales tax

Deductible real estate taxes are usually any state, local, or foreign taxes on real property. If a portion of your monthly mortgage payment goes into an escrow account and your lender periodically pays your real estate taxes to local governments out of this account, you can deduct only the amount actually paid during the year to the taxing authorities. Your lender will normally send you a Form 1098, Mortgage Interest Statement, at the end of the tax year with this information.

Personal property taxes are deductible when they are based on the value of personal property, such as a boat or car. To be deductible, the tax must be charged to you on a yearly basis, even if it is collected more than once a year or less than once a year.

Generally, you can take either a deduction or a tax credit for foreign income taxes but not for taxes paid on income that is excluded for U. S. tax.

For more information please consult your tax advisor.

To contact Rajeev C Hiremath, CPA go to the Contact Us page.  You can either call us or e-mail us through the feedback form.