Charitable Contributions

Deducting Charitable Contributions

When you give a gift to charity that helps the lives of others in need. It may also help you at tax time. You may be able to claim the gift as a deduction that may lower your tax. Here are eight tax tips you should know about deducting your gifts to charity:

1. Qualified Charities.  You must donate to a qualified charity if you want to deduct the gift. You can’t deduct gifts to individuals, political organizations or candidates. To check the status of a charity, use the IRS Select Check tool.

2. Itemized Deduction.  To deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return.

3. Benefit in Return.  If you get something in return for your donation, your deduction is limited. You can only deduct the amount of your gift that is more than the value of what you got in return. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.

4. Donated Property.  If you gave property instead of cash, the deduction is usually that item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market.

5. Clothing and Household Items.  Used clothing and household items must be in at least good condition to be deductible in most cases. Special rules apply to cars, boats and other types of property donations. See Publication 526, Charitable Contributions, for more on these rules.

6. Form 8283.  You must file Form 8283, Noncash Charitable Contributions, if your deduction for all noncash gifts is more than $500 for the year.

7. Records to Keep.  You must keep records to prove the amount of the contributions you made during the year. The kind of records you must keep depends on the amount and type of your donation. For example, you must have a written record of any cash you donate, regardless of the amount, in order to claim a deduction. For more about what records to keep refer to Publication 526.

8. Donations of $250 or More.  To claim a deduction for donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether the organization provided any goods or services in exchange for the gift.

Also refer to Publication 561, Determining the Value of Donated Property. You can get IRS tax forms and publications on IRS.gov/forms anytime.

Additional IRS Resources:

• Interactive Tax Assistant tool
• IRS Tax Map

IRS YouTube Videos:

• Fair Market Value of Charitable Donations - English | Spanish | ASL

Claiming a Home Office Deduction? Know the rules.

About the Home Office Deduction

If you use your home for business, you may be able to deduct expenses for the business use of your home. If you qualify you can claim the deduction whether you rent or own your home. If you qualify for the deduction you may use either the simplified method or the regular method to claim your deduction. Here are six tips that you should know about the home office deduction.

1. Regular and Exclusive Use.  As a general rule, you must use a part of your home regularly and exclusively for business purposes. The part of your home used for business must also be:

• Your principal place of business, or
• A place where you meet clients or customers in the normal course of business, or
• A place where you perform significant administrative functions.

2. Simplified Option.  If you use the simplified option, you multiply the allowable square footage of your office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. This option does not change the criteria for who may claim a home office deduction.

3. Regular Method.  If you use the regular method, the home office deduction includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid may qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid may qualify. The amount you can deduct usually depends on the percentage of your home used for business.

Also keep in mind that the IRS regulations cite number of rooms, but the Form 8829 requires square footage - this means that you must adjust for 'non-room' square footage in determining the area of the home.

Furthermore, equipment, furniture and supplies are deducted under normal rules for business expenses and are not included in the home office rules.

4. Deduction Limit.  If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.

5. Self-Employed.  If you are self-employed and choose the regular method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You can claim your deduction using either method on Schedule C, Profit or Loss From Business. See the Schedule C instructions for how to report your deduction.

6. S Corp Owners.  If you are an S Corp owner, we recommend reimbursing yourself for the business use of your home as you do for mileage, business use of your cell phone and/or home internet using the Form 8829 as a guide.

7. Employees.  If you are an employee, you must meet additional rules to claim the deduction. For example, your business use must also be for the convenience of your employer and having a home office must be a requirement of employment. If you qualify, you claim the deduction on Schedule A, Itemized Deductions.

For more on this topic, see Publication 587, Business Use of Your Home. You can view, download and print IRS tax forms and publications on IRS.gov/forms anytime.

Additional IRS Resources:

• FAQs - Simplified Method for Home Office Deduction

IRS YouTube Videos:

• Simplified Home Office Deduction – English | Spanish | ASL

IRS Podcasts:

• Simplified Home Office Deduction – English | Spanish

Standard vs Itemized Deductions

Standard or Itemized: Choose the Deduction Method That’s Best for You

Most people claim the standard deduction when they file their federal tax return. But did you know that you may lower your taxes if you itemize your deductions? Find out if you can save by doing your taxes using both methods. Usually, the bigger the deduction, the lower the tax you have to pay. You should file your tax return using the method that allows you to pay the least amount of tax. The IRS offers these six tips to help you choose:

1. Use IRS Free File.  Most people qualify to use free, brand-name software to prepare and e-file their federal tax returns. IRS Free File is the easiest way to file. Free File software will help you determine if you should itemize and file the right tax forms. It will do the math and e-file your return – all for free. Check your other e-file options if you can’t use Free File.

2. Figure your itemized deductions.  Add up deductible expenses you paid during the year. These may include expenses such as:  

• Home mortgage interest
• State and local income taxes or sales taxes (but not both)
• Real estate and personal property taxes
• Gifts to charities
• Casualty or theft losses
• Unreimbursed medical expenses
• Unreimbursed employee business expenses

Special rules and limits apply. Visit IRS.gov and refer to Publication 17, Your Federal Income Tax, for more details.

3. Know your standard deduction.  If you don’t itemize, your basic standard deduction for 2014 depends on your filing status:     

• Single $6,200
• Married Filing Jointly $12,400
• Head of Household $9,100
• Married Filing Separately $6,200
• Qualifying Widow(er) $12,400             

If you’re 65 or older or blind, your standard deduction is higher than these amounts. If someone can claim you as a dependent, your deduction may be limited.

4. Check the exceptions.  There are some situations where the law does not allow a person to claim the standard deduction. This rule applies if you are married filing a separate return and your spouse itemizes. In this case, you can’t claim a standard deduction. You usually will pay less tax if you itemize. See Pub. 17 for more on these rules.

5. Use the IRS ITA tool.  Visit IRS.gov and use the Interactive Tax Assistant that takes you through a series of questions just like one of our customer service representatives would.  The tool can help determine your standard deduction. It can also help you figure several of your itemized deductions.

6. File the right forms.  To itemize your deductions, use Form 1040 and Schedule A, Itemized Deductions. You can take the standard deduction on Forms 1040, 1040A or 1040EZ.


Additional IRS Resources:

• Publication 501, Exemptions, Standard Deduction, and Filing Information
• Filing Your Taxes
• IRS Tax Map

IRS YouTube Videos:

• Welcome to Free File – English
• Standard vs. Itemized Deductions – English | Spanish | ASL
• Interactive Tax Assistant – English | ASL

IRS Podcasts:

• Standard vs. Itemized Deductions – English | Spanish

Interactive Tax Assistant – English

Home Energy Credits

Cut Taxes and Save on Energy Bills with Home Energy Credits

You can reduce your taxes and save on your energy bills with certain home improvements.  Here are some key facts that you should know about home energy tax credits:

Non-Business Energy Property Credit 

• Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
• The other part of the credit is not a percentage of the cost. This part of the credit is for the actual cost of certain property. This may include items such as water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
• This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
• Your main home must be located in the U.S. to qualify for the credit.
• Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
• This credit had expired at the end of 2013. The Tax Increase Prevention Act extended it to apply for one year, through Dec. 31, 2014. You may still claim the credit on your 2014 tax return if you didn’t reach the lifetime limit in prior years.

Residential Energy Efficient Property Credit

• This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
• Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
• There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
• The home must be in the U.S. It does not have to be your main home, unless the alternative energy equipment is qualified fuel cell property.
• This credit is available through 2016.

Use Form 5695, Residential Energy Credits, to claim these credits. For more on this topic refer to the form’s instructions. You can get IRS forms on IRS.gov/forms anytime.

When will I get my refund?

Where’s My Refund?

You can quickly check the status of your tax return and refund through “Where’s My Refund?”

Taxpayers who have not yet received their refunds can use “Where’s My Refund?” on IRS.gov to find out about the status of your income tax refunds..  There is also a smartphone app available - IRS2Go 5.0.

Initial information will normally be available within 24 hours after the IRS receives the taxpayer’s e-filed return or four weeks after the taxpayer mails a paper return to the IRS. The system updates only once every 24 hours, usually overnight, so there’s no need to check more often.

So far this year, “Where’s My Refund?” has received more than 179 million hits on IRS.gov.

To use the service, you should have noted your Social Security number, filing status and exact refund amount before accessing Where’s My Refund?


IRS YouTube Videos
When Will I Get My Refund?:  English | Spanish | ASL

Child and Dependent Care Tax Credit

Reduce Your Taxes with the Child and Dependent Care Tax Credit

The Child and Dependent Care Tax Credit can reduce the taxes you pay. If you paid someone to care for a person in your household last year while you worked or looked for work, then read on for 10 facts from the IRS about this important tax credit:

1. Child, Dependent or Spouse.  You may be able to claim the credit if you paid someone to care for your child, dependent or spouse last year.

2. Work-Related Expense.  The care must have been necessary so you could work or look for work. If you are married, the care also must have been necessary so your spouse could work or look for work. This rule does not apply if your spouse was disabled or a full-time student.

3. Qualifying Person.  The care must have been for “qualifying persons.” A qualifying person can be your child under age 13. A qualifying person can also be your spouse or dependent who lived with you for more than half the year and is physically or mentally incapable of self-care.

4. Earned Income.  You must have earned income for the year, such as wages from a job. If you are married and file a joint tax return, your spouse must also have earned income. Special rules apply to a spouse who is a student or disabled.

5. Credit Percentage / Expense Limits.  The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on the amount of your income. Your allowable expenses are limited to $3,000 if you paid for the care of one qualifying person. The limit is $6,000 if you paid for the care of two or more.

6. Dependent Care Benefits.  If your employer gives you dependent care benefits, special rules apply. For more on these rules see Form 2441, Child and Dependent Care Expenses.

7. Qualifying Person’s SSN.  You must include the Social Security Number of each qualifying person to claim the credit.

8. Care Provider Information.  You must include the name, address and taxpayer identification number of your care provider on your tax return.

9. Form 2441.  You file Form 2441 with your tax return to claim the credit.

10. IRS Free File.  You can use IRS Free File to prepare and e-file your federal tax return for free.

Free File is the fastest and easiest way to file your tax return. It’s only available on IRS.gov/freefile.
See Publication 503, Child and Dependent Care Expenses, for more on this topic. You can get it on IRS.gov/forms anytime.

Additional IRS Resources:

• Tax Topic 602 - Child and Dependent Care Credit
• Filing Your Taxes
• IRS Tax Map

IRS YouTube Video:

• Welcome to Free File – English

Adoption Tax Benefits

Top Ten Facts about Adoption Tax Benefits

If you adopted or tried to adopt a child in 2014, you may qualify for a tax credit. If your employer helped pay for the costs of an adoption, you may be able to exclude some of your income from tax. Here are ten things you should know about adoption tax benefits.

1. Credit or Exclusion.  The credit is nonrefundable. This means that the credit may reduce your tax to zero. If the credit is more than your tax, you can’t get any additional amount as a refund. If your employer helped pay for the adoption through a written qualified adoption assistance program, you may qualify to exclude that amount from tax.

2. Maximum Benefit.  The maximum adoption tax credit and exclusion for 2014 is $13,190 per child.

3. Credit Carryover.  If your credit is more than your tax, you can carry any unused credit forward. This means that if you have an unused credit in 2014, you can use it to reduce your taxes for 2015. You can do this for up to five years, or until you fully use the credit, whichever comes first.

4. Eligible Child.  An eligible child is under age 18. This rule does not apply to persons who are physically or mentally unable to care for themselves.

5. Qualified Expenses.  Adoption expenses must be directly related to the adoption of the child and be reasonable and necessary. Types of expenses that can qualify include adoption fees, court costs, attorney fees and travel.

6. Domestic or Foreign Adoptions.  In most cases, you can claim the credit whether the adoption is domestic or foreign. However, the timing rules for which expenses to include differ between the two types of adoption.

7. Special Needs Child.  If you adopted an eligible U.S. child with special needs and the adoption is final, a special rule applies. You may be able to take the tax credit even if you didn't pay any qualified adoption expenses.

8. No Double Benefit.  Depending on the adoption’s cost, you may be able to claim both the tax credit and the exclusion. However, you can’t claim both a credit and exclusion for the same expenses. This rule prevents you from claiming both tax benefits for the same expense.

9. Income Limits.  The credit and exclusion are subject to income limitations. The limits may reduce or eliminate the amount you can claim depending on the amount of your income.

10. IRS Free File.  You can use IRS Free File to prepare and e-file your federal tax return for free.

File Form 8839, Qualified Adoption Expenses, with your Form 1040. Free File is only available on IRS.gov/freefile.

Additional IRS Resources:

• Tax Topic 607 – Adoption Credit and Adoption Assistance Programs

IRS YouTube Video:

• Welcome to Free File – English

Facts you should know about education tax credits.

Education Tax Credits: 

Two Benefits to Help You Pay for College

Did you pay for college in 2014? If you did it can mean tax savings on your federal tax return. There are two education credits that can help you with the cost of higher education. The credits may reduce the amount of tax you owe on your tax return. Here are some important facts you should know about education tax credits.

American Opportunity Tax Credit:

• You may be able to claim up to $2,500 per eligible student.
• The credit applies to the first four years at an eligible college or vocational school.
• It reduces the amount of tax you owe. If the credit reduces your tax to less than zero, you may receive up to $1,000 as a refund.
• It is available for students earning a degree or other recognized credential.
• The credit applies to students going to school at least half-time for at least one academic period that started during the tax year
• Costs that apply to the credit include the cost of tuition, books and required fees and supplies.
• Lifetime Learning Credit:
• The credit is limited to $2,000 per tax return, per year.
• The credit applies to all years of higher education. This includes classes for learning or improving job skills.
• The credit is limited to the amount of your taxes.
• Costs that apply to the credit include the cost of tuition, required fees, books, supplies and equipment that you must buy from the school.

For both credits:

• The credits apply to an eligible student. Eligible students include yourself, your spouse or a dependent that you list on your tax return.
• You must file Form 1040A or Form 1040 and complete Form 8863, Education Credits, to claim these credits on your tax return.
• Your school should give you a Form 1098-T, Tuition Statement, showing expenses for the year. This form contains helpful information needed to complete Form 8863. The amounts shown in Boxes 1 and 2 of the form may be different than what you actually paid. For example, the form may not include the cost of books that qualify for the credit.
• You can’t claim either credit if someone else claims you as a dependent.
• You can’t claim both credits for the same student or for the same expense, in the same year.
• The credits are subject to income limits that could reduce the amount you can claim on your return.
• Visit IRS.gov and use the Interactive Tax Assistant tool to see if you’re eligible to claim these credits. Also visit the IRS Education Credits Web page to learn more. If you can’t claim a tax credit, check the other tax benefits you might be able to claim.

Additional IRS Resources:

• Publication 970, Tax Benefits for Education
• American Opportunity Tax Credit
• Lifetime Learning Credit
• American Opportunity Tax Credit: Questions and Answers

IRS YouTube Videos:

• Education Tax Credits – English | Spanish | ASL

IRS Podcasts:

• Education Tax Credits – English | Spanish

Medical Expense Deduction Rules

Claiming a Tax Deduction for Medical and Dental Expenses

Your medical expenses may save you money at tax time, but a few key rules apply. Here are some tax tips to help you determine if you can claim a tax deduction:

• You must itemize.  You can only claim your medical expenses that you paid for in 2014 if you itemize deductions on your federal tax return. If you take the standard deduction, you can’t claim these expenses.
• AGI threshold.  You include all the qualified medical costs that you paid for during the year. However, you can only deduct the amount that is more than 10 percent of your adjusted gross income.
• Temporary threshold for age 65.  If you or your spouse is age 65 or older, the AGI threshold is 7.5 percent of your AGI. This exception applies through Dec. 31, 2016.
• Costs to include.  You can include most medical and dental costs that you paid for yourself, your spouse and your dependents. Exceptions and special rules apply. Costs reimbursed by insurance or other sources do not qualify for a deduction.
• Expenses that qualify.  You can include the costs of diagnosing, treating, easing or preventing disease. The costs you pay for prescription drugs and insulin qualify. The costs you pay for insurance premiums for policies that cover medical care qualify. Some long-term care insurance costs also qualify. For more examples of costs you can and can’t deduct, see IRS Publication 502, Medical and Dental Expenses. You can get it on IRS.gov/forms anytime.
• Travel costs count.  You may be able to claim travel costs you pay for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 23.5 cents per mile for 2014.
• No double benefit.  You can’t claim a tax deduction for medical expenses you paid for with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free. This rule prevents two tax benefits for the same expense.
• Use the tool.  You can use the Interactive Tax Assistant tool on IRS.gov to see if you can deduct your medical expenses. The tool can answer many of your questions on a wide range of tax topics.

Additional IRS Resources:

• Schedule A (Form 1040), Itemized Deductions
• Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans

IRS YouTube Video:

• Medical and Dental Expenses – English | Spanish | ASL

IRS Podcasts:

Medical and Dental Expenses – English | Spanish