Qualifying Dependents

I was recently asked by a client whether or not they could claim their father (who is over 65) that lives with them as a dependant. The answer is yes! This client takes care of her father, who is completely dependant upon her for his care both personally and financially. This is as long as they live in the same household.

For Example:
Ms. Hernandez is 72 years old and lives in an apartment. Last year she received $3,000 in nontaxable Social Security benefits and $400 in taxable interest income, all of which was used for her support. Ms. Hernandez's daughter, Theresa, paid $4,800 during the year toward her mother's support. Total support includes taxable and nontaxable income. Ms. Hernandez's total support is $8,200 ($3,000 + $400 + $4,800). Theresa paid more than half of her mother's support ($4,800/$8,200 = 59%).

Theresa can claim a dependency exemption for Ms. Hernandez.

Secondly, client also asked whether or not they could claim their handicapped child (who is 21) as a dependant. This answer to this is yes as well. The IRS allows a taxpayer to claim a child, no matter their age as a dependent, as long as they live in the same household.

A taxpayer can also claim a child as a dependent that is under 24 years old and the taxpayer cares for over 50% their expenses. Say for instance, a child in school and does not work is allowed to be claimed a dependent because they depend on their caregiver for over half of their living expenses. However, if the child is living at home, has a job, and prov, then they pays for more than 50% of their necessary living expenses, then they are not be considered a dependent because of the amount of income they generate. They would need to file an income tax return themselves.

Mortgage Revenue Bonds

With much anxiety our nation has been experiencing over the economy, there will be relief for those who have suffered in the housing market with forclosures. Under The Housing And Economic Recovery Act of 2008, the legislation authorizes up to $11 billion in additional tax-exempt bonds for refinancing sub-prime loans, lending to first time homebuyers, and investment in affordable housing.

Additionally, it offers nearly $4 billion in federal grants to state and local governments for the purpose of buying foreclosed homes, rehabilitating them, and then selling them as affordable housing.

The act raises to $625,000 the limit for loans backed by FHA, Fannie Mae, and Freddie Mac. This increase is primarily geared toward markets with very high values such as California, allowing for more refinancing opportunities and lower interest rates on the loans. Additional changes include a one-year moratorium on risk-based pricing by the FHA and reforms to the HECM and manufactored housing programs. The act also raises the minimum down payment required on FHA-backed loans to 3.5 percent from 3 percent.

HOPE:A Provision Of The Housing & Recovery Act 2008

There are other notable provisions to The Housing And Economic Recovery Act of 2008 that many taxpayers will benefit from in 2009.

The Home Ownership Preservation Entity (HOPE) section establishes a fund to assist distreessed borrowers in obtaining 30-year refinance loans.

To qualify, the lender must voluntarily agree to write down the loan to 90% of current appraised home value, and borrowers must give 50% of future home appreciation to the FHA.

If you have questions about this Recovery Act and what it entails (come tax time), contact a tax professional versus attempting to prepare your returns on your own. When preparing your own return, one might forget to factor in this opportunity.

Local Radio Station Bails Out Joe The Plumber

Shortly after John McCain made Ohio plumber Joe Wurzelbacher a household name following last Wednesday’s presidential debate, reporters and bloggers soon discovered a couple problems with Joe’s everyman story.

First, they discovered his name wasn’t exactly Joe—full name Samuel Joseph Wurzelbacher. Then, it turned out that while he practices the trade, Joe wasn’t a licensed plumber. And finally, while Joe was bemoaning Barack Obama’s proposed tax increases, the Ohioan was also delinquent on paying his own—with a $1,200 tax lien against him by the state of Ohio.

In response to the media coverage, two local Portland, Oregon radio hosts launched this article to help Wurzelbacher pay his back taxes.

Portland’s 1190 KEX’s afternoon News Radio hosts Mark Mason and Dave Anderson succeeded in that goal today, not only raising the $1,200 Joe the Plumber needs to pay his taxes, but also the $500 he’ll need to get his plumber’s license.

In an e-mail to Washington Wire, Mason writes that the hosts spoke to Wurzelbacher and his brother on air tonight to break the news. “We just spoke with Joe (and his brother) LIVE right now…felt that the media was unfair in that they never seemed to ask HIM about his background,” Mason wrote this evening, “He was very grateful for the $$.”

Still Missing Your Refund Or Stimulus Check???

The Internal Revenue Service is looking for taxpayers who are missing more than 279,000 economic stimulus checks totaling about $163 million and more than 104,000 regular refund checks totaling about $103 million that were returned by the U.S. Postal Service due to mailing address errors.

“People across the country are missing tax refunds and stimulus checks. We want to get this money into the hands of taxpayers where it belongs,” said IRS Commissioner Doug Shulman. “We are committed to making the process as easy as possible for taxpayers to update their addresses with the IRS and get their checks.”

All a taxpayer has to do is update his or her address once. The IRS will then send out all checks due.


Stimulus Checks
It is crucial that taxpayers who may be due a stimulus check update their addresses with the IRS by Nov. 28, 2008. By law, economic stimulus checks must be sent out by Dec. 31 of this year. The undeliverable economic stimulus checks average $583.

The “Where’s My Stimulus Payment?" tool on this Web site is the quickest and easiest way for a taxpayer to check the status of a stimulus check and receive instructions on how to update his or her address. Taxpayers without internet access should call 1-866-234-2942.


Regular Refunds
The regular refund checks that were returned to the IRS average $988. These checks are resent as soon as taxpayers update their address.

Taxpayers can update their addresses with the “Where’s My Refund?” tool on this Web site. It enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2007 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.

Changes to $250 k/$500 k Exclusions on Home Sales Gains

Under the newly revised code, taxpayers can no longer take a full exclusion (up to $500,000 for joint filers) on gains from the sale of their primary residence if there was non-qualified periods based on the time it was designated as each. Also, portion of the gain assigned to the non-qualified period will not be excluded from homeowner income. So, if a real property was a rental for four years and then converted to a primary for six years prior to sale (a total of 10 years ownership), then 60% would qualify for exemption up to $500k joint threshold ($250K single).

State and Local Property Tax Deduction:
For tax year 2008, non-itemizing taxpayers can claim an additional real property tax standard deduction of up to $1000 for joint filers. This in addition to the standard deductions.

New Tax Credit For Some Home Buyers

In 2009 there is a temporary, one-time tax credit up to ten percent of property value , not to exceed $7500 for joint filers and subject to income phaseouts. Under the act's housing assistance section, first-time buyers of a principle residence who purchase the property between April 8, 2008 and July 1, 2009, can take this refundable federal tax credit, which phases out for joint filers and subject to income phaseouts. Under the act's housing assistance section, first-time buyers of a principle residence who purchase the property between April,8 2008 and July 1, 2009, can take this refundable federal tax credit, which phases out for joint incomes between $150,000 AND $170,000.

Although the tax credit limits are low for some areas of the country, many view this provision as a down payment assistance device, since it provides up to ten percent of a home's value . This credit is self-supporting, since it requires taxpayers who receive it to repay it over 15 years through their annual returns.