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March 2010

Homeowners get lots of tax breaks, but Vermont also offers renters a tax credit for their housing payments. Eligible renters can get a portion of rent paid that exceeds, depending on your income, 2 percent, 4.5 percent or 5 percent of that earnings amount. The maximum rebate is $8,000. To qualify for the Renter Rebate Program you must meet all of the following requirements: You were a legal resident of Vermont for the entire calendar. You were not claimed as a dependent of another taxpayer. Your household income did not exceed $47,000. You are the only person in the household... Read more →

The world's strangest tax breaks

Here in the United States, we like to think we're special. But we've got nothing on the rest of the world when it comes to unusual tax laws. With the U.S. tax-filing deadline bearing down, Foreign Policy magazine took a look at some of the world's weirdest tax breaks. My favorite is The Netherlands tax deduction for a course on witchcraft: Margarita Rongen, the headmistress of Heksehoeve (Dutch for "witch farmhouse"), offers a yearlong curriculum in spell-casting, herbology, potions, and divination, among other classes. ... In a case brought before Dutch tax authorities in 2005 by pupil Maaike Buurman, it... Read more →

Utah residents who donate an organ get more than the satisfaction of helping someone else live. They could get a tax credit of up to $10,000. The Live Organ Donation Expenses Credit can be claimed for certain expenses incurred by a taxpayer who donates one or more of their qualified organs. The tax-approved donations are bone marrow or any part of an intestine, kidney, liver, lung or pancreas. Eligible expenses related to such donations include travel, lodging and lost wages. The credit is nonrefundable, meaning it can reduce your Beehive State tax bill to zero but you won't get any... Read more →

The federal homebuyer credit's
'exit strategy problem'

We are now a month away from the deadline for property buyers to have signed contract in hand so they can claim the latest version of the federal homebuyer tax credit. Any guesses as to when we'll start hearing about the need to continue it yet again? How about yesterday. This tax credit, which is propping up the housing industry, has what one economist so nicely dubbed an exit strategy problem. "If you have a short-run program to stimulate demand, it's always tricky to figure out how you gently remove it without going off a precipice," James M. Poterba, an... Read more →

You might have seen Tennessee in the list of states that don't collect an income tax. That's correct ... to a point. The Volunteer State doesn't tax wage income, but it certainly wants its residents to hand over 6 percent of the interest they earn from bonds and notes and from dividends from stock. This tax has been around since 1929. It originally was called the Hall income tax for the senator who sponsored the legislation. The state does, however, offer a break for its senior citizens. If you're older than 65 with total income less than $16,200 as a... Read more →

We're heading into tax crunch time and some filers are starting to freak out. Please don't. Getting in hurry will cause you to make mistakes, like forgetting to file a Schedule M to claim the Making Work Pay credit. Yep, in addition to having issues with filling out this form, some taxpayers are just ignoring it altogether. Again, please don't. You need to file this new piece of tax paperwork to ensure you get credit for adjusted withholding taken out of your pay last year. The Making Work Pay credit is worth up to $400 for singles and $800 for... Read more →

Families nowadays tend to rely on both husbands and wives bringing home paychecks. Sometimes, though, the combined incomes can push couples into a higher tax bracket. South Carolina has a credit that makes up at least a little for that. The Palmetto State's two wage earner credit of 0.7 percent of the lower spousal income amount can be claimed by a dual earning married couple that files jointly. The instruction booklet for the SC1040 tax return has a brief worksheet for couples to compute their earned income. Be sure to use it. Certain adjustments from South Carolina earned income must... Read more →

Does the tanning tax discriminate?

The first health care related tax to go into effect is the 10 percent addition to the cost of UV tanning services. That starts on July 1. Obviously, tanning bed operators and customers are not happy. And as with other portions of the new health care law, lawyers have been weighing in. Over at TaxProf Blog, a reader/attorney cites the 1995 Adarand Constructors v. Peña Supreme Court case and wonders whether the new law is discriminatory. I'm not a lawyer, but I can't see how this would be an issue. True, most tanning service customers tend to be folks with... Read more →

With the advent of supermarkets, stores started stocking much more than just food. Such a wide variety of choices is welcomed by most shoppers, but the options also make it hard to keep track of exactly what's taxed and what's not. Enter Rhode Island tax officials. The state's Division of Taxation maintains a comprehensive online catalog of taxable and nontaxable grocery items. The list goes from ace bandages to zippers for clothes, both of which are subject to the state's 7 percent sales tax, and myriad items in between. There definitely are some intriguing entries. Bibles and prayer books are... Read more →

When I started the state tax tidbits feature last month, I said it was because I didn't write that much about state taxes. Since then, it seems that every third tax item I've come across is state related. Best laid plans. Sorry. But I couldn't resist this cool map. It's a reproduction of a Council on State Taxation graphic by Tax Policy Blog via a tip of the hat to Tax Update Blog. It shows how states levy income taxes on visiting workers and sometimes even on workers who don't cross their borders. The map is part of the Council's... Read more →

Do you owe back taxes to the Keystone State? Then mark April 26 on your calendar. Beginning that day and running through June 18, some delinquent Pennsylvania taxpayers can apply to the department to participate in the state's tax amnesty. Qualifying taxpayers will be required to file an amnesty return with the Department of Revenue and pay all delinquent taxes. But they'll only have to pay half of the interest that had accrued on the tax debt and all penalty charges will be waived. In addition to personal income taxes, a wide variety of taxes that were delinquent as of... Read more →

Despite some still crisp nights, summer vacation season is fast approaching. I know this not from weather reports, but because gasoline prices here in Texas have gone up for four straight weeks. That trend also is apparent nationwide. My little old Cavalier still gets decent mileage, so I'm not in the market for new car. Heck, even the new vehicle tax deduction couldn't persuade me to buy one last year. But some folks who perhaps didn't take part in Cash for Clunkers or, like me, put off a new car purchase in 2009 might now be finding they need new... Read more →

Uncle Sam is just beginning a national effort to regulate tax professionals, but Oregon has had an oversight system in place since 1973. Beaver State law requires residents who prepare, advise or assist in the preparation of personal income tax returns for a fee, or represent that they do so, be licensed. Licensing is handled by the Oregon Board of Tax Practitioners. Around 4,000 individuals have been issued one of two types of licenses: Apprenticeship license that allows a person to prepare personal income tax returns under supervision of a licensed tax consultant, and Licensed tax consultant status, obtained by... Read more →

Health care reform taxes, redux

The Senate bouncing the health care reform fixes back to the House and state attorneys general filing lawsuits in connection with the recently signed main bill gave me time to pull together a closer look at 10 key tax provisions in the new law. You can check them out in my two posts (yep, it's that big) at my other blog, Eye on the IRS. Part one went up Tuesday; part two was posted earlier today. UPDATE, March 25, 2010, 11 p.m. CDT: The House cleared the final health care reform hurdle tonight by passing a reconciliation bill by a... Read more →

Recovering Social Security overpayments

That headline is not what Uncle Sam wants to see today. The New York Times reports that this year the Social Security system will pay out more in benefits than it receives in payroll taxes. That wasn't supposed to happen, per government estimators, until 2016. Stephen C. Goss, chief actuary of the Social Security Administration, tells the paper that the economy is a big reason for the earlier-than-expected arrival of this crucial tipping point. Social Security payments have risen more than expected during the downturn because people lost jobs applied for benefits sooner than they had planned. While that was... Read more →

I'm not a basketball fan, but I hear tell that the men's collegiate roundball tournament moves to an important stage today, the Sweet 16. I'm also not a bettor on sporting events, but I also hear tell that the annual NCAA basketball playoffs provides Nevada with its second largest take of gambling money, just behind the Super Bowl. So I want to remind all you betting basketball fans that you need to consider more than just tournament brackets. Income tax brackets count, too, since the IRS wants its part of any dinero you rake in during March Madness. I know... Read more →

IRS opens doors this Saturday

Having trouble filling out your return? You can go straight to the Internal Revenue Service this Saturday for help. More than 180 IRS offices will be open on March 27 from 9 a.m. to 2 p.m., local time, to help taxpayers. "We are holding these special open houses to give taxpayers who are struggling in these difficult economic times more opportunity to work directly with IRS employees to resolve their tax issues," said IRS Commissioner Doug Shulman. During the Saturday hours, taxpayers will be able to talk with IRS employees about economic hardship issues, make payment arrangements or get help... Read more →

The oil industry is still big in Oklahoma, but that's not stopping officials there from offering taxpayers a substantial credit for electric vehicles. The Credit for Investment in Qualified Electric Motor Vehicle Property is worth 50 percent of the price of the vehicle. You can claim it by filing Form 567-B. The credit, however, has not been without controversy. Sooner State tax officials say that under the tax credit law, "the term 'qualified electric motor vehicle property' shall not apply to vehicles known as 'golf carts,' 'go-carts' and other motor vehicles which are manufactured principally for use off the streets... Read more →

More big business stimulus tax breaks

How does this keep happening? Apparently private sector lawyers are much better than Uncle Sam's attorneys. Or, as Scott Jagow who blogs at Marketplace radio's The Scratchpad, puts it: "The government's generosity toward big business in this recession has known few boundaries." The latest example, per the Wall Street Journal, is JP Morgan Chase & Co., which is nearing a deal that would allow it to benefit from a tax refund of as much as $1.4 billion, becoming the latest company to tap a little-noticed plank in an economic stimulus bill. That law let companies apply losses from 2008 or... Read more →

Most tax procrastinating cities

TurboTax has once again looked at its data and ranked U.S. cities according to how many of their residents put off tax filing. This year's winner, or loser depending on your point of view, is Houston. Yay, Texas! Yeah, we're obnoxious that way. We like to be top of the heap even when the statistics are bad! Infographic by Column Five Media, courtesy of Click here for a larger version. Actually, the list is from the 2009 filing season, which makes sense since the 2010 numbers are still coming in. TurboTax arrived at rankings based on the number of... Read more →