Federal Tax News for Individuals
Tax Help for College Expenses
Although many college students are off for the summer, it’s a good time to consider the education tax breaks you may be able to claim on your 2023 tax return. There are many possibilities that can help offset the rising costs of higher education, including the American
Opportunity Tax Credit (AOTC).
The AOTC provides a credit of up to $2,500 for post-secondary education expenses, per eligible student (not per tax return). So, taxpayers who are paying qualified expenses for more than one student may be able to take up to the full $2,500 for each one. The credit phases out at certain income levels. Contact us to learn how to get the maximum tax breaks available for your education expenses.
Overlooked Deductions and other Tax Errors
Have you ever discovered an overlooked deduction on a federal tax return that you’ve already filed? Or did you ever realize that you didn’t report income or reported too much? An amended tax return may be the answer.
Amended returns generally must be filed within three years from the date you filed the original return, or within two years after the date you paid the tax, whichever is later. However, there are exceptions to this rule. For example, when it comes to amending a tax return to claim a loss for worthless investments or nonbusiness bad debts, you have up to seven years. We can answer questions about your situation.
Check a Charity’s Status Before Donating
Taxpayers who make charitable donations to tax-exempt organizations may be able to claim a deduction on their federal tax returns.
However, to receive the deduction, you must donate to “qualified” organizations.
To learn if the organization you’d like to make a donation to is eligible to receive tax-deductible charitable contributions, use the IRS’s Tax-Exempt Organization Search tool (access it here). This online tool allows you to search for an organization’s tax-exempt status and filings. The IRS periodically updates its list of qualified organizations, and it just announced five organizations that are no longer eligible. Contact us with any questions.
Taxability of Disability Income
You must report as income on your tax return any amount you receive for a disability through an accident or health insurance plan paid for by your employer. If you paid the entire cost of a health or accident insurance plan, you don’t have to include amounts you receive for your disability as income.
In one case, a taxpayer’s employer provided disability insurance to employees and paid 100% of the premiums. The taxpayer received $105,000 in disability payments and didn’t report them on his joint return. The U.S. Tax Court ruled that the disability payments weren’t excludable from his gross income and, therefore, he owed $26,292 in tax and an accuracy-related penalty. (TC Summary Op. 2023-17)
Health Savings Accounts for 2024
Health Savings Accounts (HSAs) are tax-advantaged savings accounts funded with pretax dollars. Funds can be withdrawn tax-free to pay for qualified medical expenses. An HSA must be coupled with a high-deductible health plan (HDHP). The IRS annually adjusts HSA and HDHP amounts based on inflation.
For 2024, the HSA contribution amount for individuals is $4,150 ($3,850 for 2023) and $8,300 ($7,750 for 2023) for those with family coverage. The minimum HDHP deductible for individuals is $1,600 ($1,500 for 2023) and $3,200 for family coverage ($3,000 for 2023). The maximum HDHP out-of-pocket cost is $8,050 for self-coverage ($7,500 for 2023) and $16,100 for family coverage ($15,000 for 2023).