Need Help Funding Long Term Care Insurance?
March 23, 2010 | 
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There have been important changes in the tax free exchange rules for life insurance and annuities. These changes may help you if you have a need for long term care insurance.
As of January 1st, 2010, the Pension Protection Act has made it possible to use cash from life policies to fund long term care premiums through a 1035 tax free exchange. This means that if you have life insurance policies with cash value that you might not really need any longer, you could fund a long term care policy to protect yourself and your family without reaching into your pocket any deeper.
There is a lot of information coming out to us every day on this change and we are working to keep up to date on how the various insurance companies are utilizing this change.
Submitted by Christine Schmitz
Questions?
christine.schmitz@glassjacobsonia.com
HIRE Tax Provisions
March 22, 2010 | Subscribe to our RSS Feed
The Hiring Incentives to Restore Employment Act (HIRE) creates 2 important tax provisions for businesses this year.
- Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after the date of enactment. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.
- In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.
The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.
In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.
Submitted by Sam Cohen
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Should I Itemize or Take the Standard Deduction?
March 15, 2010 | Subscribe to our RSS Feed
Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions. If you have a choice, you can use the method that gives you the lowest tax.
Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than your standard deduction, you can usually benefit by itemizing.
The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2009, they are:
- $5,700 for Single
- $11,400 for Married Filing Jointly
- $8,350 for Head of Household
- $5,700 for Married Filing Separately
- $11,400 for Qualifying Widow(er)
Submitted by Sam Cohen
Questions?
Five Important Tax Credits to Consider for 2009 Filing
March 11, 2010 | Subscribe to our RSS Feed
Five tax credits to consider before you file this year:
- The Earned Income Tax Credit is a refundable credit for certain people who work and have earned income from wages, self-employment or farming. Income, age and the number of qualifying children determine the amount of the credit. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit.
- The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
- 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. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.
- The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).
- The Health Coverage Tax Credit pays up to 80% of the health insurance premiums for eligible Trade Adjustment Assistance recipients and Pension Benefit Guaranty Corporation payees. You can complete IRS Form 8885, Health Coverage Tax Credit to claim the credit on your tax return. To determine if you’re qualified, or to find out how to receive the HCTC each month, visit IRS.gov and search for “HCTC.”
Submitted by Sam Cohen
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Paying Mortgage Insurance? Take a Deduction in 2010.
March 8, 2010 | Subscribe to our RSS Feed
Homebuyers who do not have sufficient funds to make a full down payment on a home may be required to obtain mortgage insurance to guarantee the loan.
Historically, mortgage insurance premiums were not considered the same as interest paid on a mortgage and were not deductible. However, for a limited period of time, mortgage insurance premiums can be treated as qualified residence interest and deducted. There are some restrictions:
- Premiums must be paid or accrued for qualified mortgage insurance obtained in connection with acquisition indebtedness on a qualified residence.
- Premiums must be paid or accrued after 2006 with respect to mortgage insurance contracts issued after 2006.
Right now, this provision is limited. Unless it is extended, it will not be available after 2010.
Submitted by Sam Cohen
Questions?