Earned Income Tax Credit for Certain Workers

This is a federal tax credit for individuals who work but do not earn high incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund. EITC is based on the amount of your earned income and the number of qualifying children in your household. If you have children, they must meet the relationship, age and residency requirements. And, you must file a tax return to claim the credit. Our CPA Firm can help you understand these requirements.

Credit for the Elderly or Disabled

You may be able to take the Credit for the Elderly or the Disabled if you were age 65 or older at the end of last year, or if you are retired on permanent and total disability, according to the IRS. Like any other tax credit, it’s a dollar-for-dollar reduction of your tax bill. The maximum amount of this credit is constantly changing.

Refinancing your Home

Many individuals make mistakes here when a CPA firm could have help them. Accurate accounting is of the utmost importance.

For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off.

Other closing costs — such as appraisal fees and other non-interest fees — generally are not deductible. Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.

Selling your Home

If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return. This exclusion is allowed each time that you sell your main home, but generally no more frequently than once every two years.

Foreign-Earned Income

This applies whether a person lives inside or outside the United States. The foreign income rule also applies regardless of whether or not the person receives a Form W-2, Wage and Tax Statement, or a Form 1099 (information return). Citizens living outside the U.S. may be able to exclude up to a certain amount that is adjusted annually for inflation ($103,900 for 2018, $105,900 for 2019, $107,600 for 2020, and $108,700 for 2021) of their foreign source income if they meet certain requirements. However, the exclusion does not apply to payments made by the U.S. government to its civilian or military employees living outside the U.S.