Tax Refunds & Advice

Upon filing your final return you are going to learn one of three things: 1. you owe money to the IRS. 2. You are going to receive a refund from the IRS. 3. You paid the exact right amount in taxes and nobody owes anybody a dime. Numbers one and two are the most common. And as you know, it is much better to receive a refund than to owe the IRS more money in taxes.

If you are facing a large tax bill you are in a tough spot. This is particularly true if you don’t have the money on hand to pay. The most important thing to do at this point is to stay organized. You need to know exactly how much money you owe the IRS, and what your options are for paying them.

Those who owe a large tax bill and can pay it outright should do so. There is no reason to drag this out if you have the money on hand to pay what you owe. But on the other hand, a large tax bill often times means that you don’t have enough cash to pay all at once. In this case you need to get setup on a payment plan with the IRS. This means that you will send the money you owe, plus interest, on a regular basis until it is paid off.

When facing a large tax bill you need to know exactly what situation you are in, and what you can do about it. And remember, if you find yourself owing more money this year you should make the proper adjustments so you never face this problem again in the future. 
 

Most students need loans in order to pay for college. This has become more and more common as the number of students attending college has increased. And while paying off student loans after graduation can be a pain, you should know that there is one big benefit of doing so: the interest that you pay on your loans is tax deductible. There are some cases when you may not be able to deduct your student loan interest, but they probably won’t effect you early in your professional life.

First things first, you can deduct student loan interest even if you do not itemize; this is something that many people are not aware of. If you are worried about the restrictions and process for deducting student loan interest it would be in your best interest to speak with a qualified professional or CPA.

Your student loan lender will send you a Form 1098-E. The amount of interest that you paid in the prior year will be included on this form. This is the amount that you can deduct on your final return. That being said, the maximum amount of interest that you can deduct is $2,500.

The student loan interest tax deduction can be limited based on your income.

1. Those with an income of less than $55k, or $115,000 for married filing jointly, can deduct up to the full $2,500.

2. If your income is between $55k and $70k, or $115k and $145 for married filing jointly, your deduction will be prorated.

3. Those who earn more than $70k, or $145k married filing jointly, do not qualify to deduct student loan interest.

Can you deduct your student loan interest this year? If so, take advantage. This is one of the biggest tax deductions out there, and one that you don’t want to forget about.

Do you have a mortgage? If so, it is safe to say that you pay interest on this loan month in and month out. In fact, you probably pay so much in mortgage interest that this bugs you on a regular basis. And while paying interest on a loan is never fun, you need to realize that there is a definite benefit of doing so: mortgage interest is tax deductible. When filing your final return, make sure you deduct any interest that you paid on your mortgage throughout the year. Don’t worry, your lender will send you all the documentation you need.

Your mortgage interest will be reported on Form 1040, Schedule A. This is listed along with other itemized deductions such as medical expenses, donations, etc. Of course, if your itemized deductions are not more than the standard deduction you do not have to worry about this. In this case, you will simply take the standard deduction and forget about your mortgage interest.

Do I qualify? Most people are allowed to deduct their mortgage interest but you should still know the qualification details just to make sure. Requirements include: filing form 1040 and itemizing your deductions; being legally liable for the loan; the mortgage must be on a first or second property; and the mortgage must be secured debt.

When you receive Form 1098 from your mortgage lender it will show how much money you paid in interest the past year. This is all you need to take with you when you visit your tax professional to file your final return. If you meet the qualifications you will be able to deduct your mortgage interest, and in turn owe the IRS less money. How does that sound to you?