Thursday, May 2, 2013

Plenty Of Opportunity Reduce Taxes Without Renouncing American Citizenship

By Alison Wilcox


The news media has published stories about wealthy people renouncing U. S. Nationality to reduce their tax burden. But, the small number taking this option indicates it has limited appeal, even if the number is rising. For others, it is better to figure out how they can reduce taxes without renouncing american citizenship.

There are various ways to reduce what you owe the Government. For instance, health care spending account contributions avoid federal, state and local income taxes. They are also not subject to Social Security and Medicare taxes. This money can be withdrawn to reimburse qualified health costs. The caveat is that if amount is not utilized by the end of the plan year or, for some some employers, by March 15 of the following year, you sum remaining in the account will be lost. As of 2013, the maximum amount that can be contributed from each paycheck is 2,500 dollars.

You can also use dependent care accounts that permit contributions of an amount up to 5,000 dollars a year to cover child care expenses or day care for a disabled spouse or dependent. For child care, the child should be under 13 years of age. You need to be looking for work, employed or a full time student to qualify for this benefit. If the amount is not fully spent by the end of the plan year, the remaining amount will be lost. You can set aside funds for commuting expenses in transportation spending accounts. The monthly allowable maximum may change each year. In 2012, it was 240 dollars for parking and 125 for other commuting expenses. Such plans permit contribution adjustments during the plan year. What is not used is not taken away in this case.

If you have losing investments that are not held in IRA accounts, they can be sold to reduce your burden. Should investment losses exceed gains, they can be written off to the tune of up to ordinary income amount of USD 3,000. Any left over losses can be carried forward to offset USD 3,000 of ordinary income and capital gains in future years.

For renters home office deductions pose less complicated issues than homeowners. A renter will need simply to determine what portion of the residence is used as office space and multiply that portion by the rental figure. Homeowners who suspect property assessments exceed its value can file an appeal.

A 529 savings plan for college is another possible option for savings. If your offspring decides to forego college, another beneficiary can be named or the contributor can cash out of the account. This cashed out figure is subject is taxable and there will be a 10 percent penalty on earnings.

The American Opportunity Credit can be taken advantage of when college payments commence. This credit returns a maximum of 2,500 for each student. Parents must have a qualified modified adjusted gross income sum. This credit applies to first four years of undergraduate education. Thereafter, there is the Lifetime Learning Credit which a maximum sum of 2,000 per family in qualified expenses each year. This credit is not available when modified adjusted gross income exceeds stipulated amounts for single and joint filers.

These are just a few ways to lower what is owed. Ingenious and determined taxpayers have successfully claimed creative deductions. Even though some may not be considered possible, in certain circumstances they are legitimate deductible expenses. The unconventional items approved by the U. S. Tax Court reveal what is possible. There are many ways you can reduce taxes without renouncing american citizenship.




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