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Tax Tips of the Month
As schools get back in session, it's a good time to check the education tax breaks for which you might qualify. First, there's the Hope credit for a percentage of qualified expenses paid during each of the first two years of higher education. Second, the lifetime learning credit allows a deduction for a percentage of qualified expenses paid for any year the Hope credit isn't claimed, and it even applies to job-related classes. Third, you may qualify for a deduction for interest paid on student loans. Fourth, education savings accounts allow annual nondeductible contributions for every child under 18, with tax-free withdrawals for qualifying education expenses. Section 529 plans for college expenses should also be investigated.
This is the time of year to pay attention to the income levels at which various tax breaks phase out. While it doesn't make sense to make less income just to qualify for a tax break, shifting income from one year to another may sometimes be a smart thing to do.
If you're planning to make some home renovations, get details on the tax credits for improving the energy-efficiency of your home. For instance, solar hot water heaters are eligible for a maximum credit of $2,000. In addition, a 10% credit ($500 limit) is available for home improvements such as insulation and energy-efficient windows. For details, give us a call.
If you're facing college or other education bills this fall, check out the tax breaks for education expenses. There are several tax credits and deductions, but maximizing the available tax benefits can be complicated. For help in reviewing the tax breaks available in your situation, contact our office.
Review your investment portfolio to see if you should sell some losers to offset investment gains you've had this year. You might want to sell enough investment losses to exceed gains by $3,000, the amount of net capital losses you can use annually to offset other income.
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