Latest news with #taxdeduction
Bloomberg
18 hours ago
- Business
- Bloomberg
GOP Reaches Tentative SALT Deal at $40,000 Cap, Five-Year Limit
Republicans have reached a tentative deal to raise the limit on the state and local tax deduction to $40,000 a year for a five-year period, according to a person familiar with the matter. It wasn't immediately clear whether enough of the so-called SALT Republicans in the House would accept the concession and drop their threats to block President Donald Trump's massive tax and spending package.
Yahoo
a day ago
- Business
- Yahoo
$300 ATO warning over last minute buys to score tax deduction: ‘Beware'
Australians are being warned to think about what they buy before June 30 because not everything will be 100 per cent tax deductible with the Australian Taxation Office (ATO). The end of the financial year is just days away and many people are looking to make some last-minute purchases to boost their returns. Tax Invest Accounting director Belinda Raso told Yahoo Finance that ATO rules meant assets purchased before June 30 that are over $300 won't be able to be claimed in full in this year's tax return. This applies to depreciating assets, so things like furniture, equipment, laptops, mobile phones and hand tools. For these items, you can't claim an immediate tax deduction. Instead, you need to write-off the cost of the asset over a period of time, which will be the effective life of the asset and is usually at least two years. RELATED Major ATO tax warning as Aussies go on $1,714 spending spree before June 30 Centrelink $836 cash boost for 'very real' truth facing thousands of Aussies ATO issues July 1 warning to Aussies waiting on $1,500 tax refunds 'So at this time of year, we've got so many different companies like Officeworks spruiking everything's tax deductible,' Raso said. 'And it is, but you're not going to get all of that money back. Employees must be aware that if it's over $300, it must be claimed over its useful life.' For example, if you bought a $3,000 computer on June 15 for 100 per cent work use, your deduction for this financial year would be $66, not the full $3,000. If you bought it on July 1, you would be able to claim a whole year's worth of depreciation in next year's tax return because it goes by the date of purchase. 'So you could be looking at a $750 deduction rather than that $66,' Raso said. It comes as Officeworks' research reveals two in five Aussies plan to spend more on tax-deductible items than they did last year, with laptops, tech, stationery and office furniture topping tax-time shopping lists. The items need to be for work use, not personal in order to be claimed as a tax deduction. Raso said you could still buy items now, but 'beware' you won't get the full tax benefits this financial year. 'As long as they've got the cashflow for it and know that they're not going to get the benefit in this financial year, by all means, you can do it now,' she said. 'But most people are pushing these expenses forward and buying it now with the thinking that it's all going to be claimable. So as long as they're wary of the timing. 'There's no rush before June 30, unless it's under $300.' The ATO has a depreciation tool you can use through myGov or their website. It has a list of the useful lives of assets that you can search. For example, a laptop and an iPad will generally have a useful life of two years, a mobile phone will be two years, and a desktop computer and most hand tools will be four years. You can then claim the depreciation of the asset over the following year's tax returns. 'Whether you go through a tax agent or you lodge it yourself, that depreciation schedule that you'll have, you then need to continue that on for every tax return until it's fully expensed,' Raso said. 'That's important when you are changing accountants that you do provide a copy of your tax return, or provide a copy of what you've lodged yourself because in most cases if you don't do that, you're going to forget and end up not claiming the rest of your depreciation and that's just leaving money on the table.'Sign in to access your portfolio
Bloomberg
3 days ago
- Business
- Bloomberg
Key Republicans Signal 'Progress' on SALT Deal After Bessent Meeting
House Republicans from high-tax states signaled they're inching closer to a deal on the state and local tax deduction following a Wednesday meeting with Treasury Secretary Scott Bessent. Young Kim of California and Andrew Garbarino of New York both said they made progress at the meeting but did not divulge details on the negotiations, which are crucial to passing President Donald Trump's multi-trillion dollar tax and spending bill.
Yahoo
3 days ago
- Business
- Yahoo
How to qualify for student loan interest deduction
Tax breaks are available for current students and those who have already graduated from college, although rules for each individual program vary. Student loans can reduce your annual income tax burden through the student loan interest deduction, whereas the American opportunity tax credit and the lifetime learning credit apply to higher education expenses. The student loan interest deduction is available whether you have federal or private loans, and it can reduce your taxable income by up to $2,500 annually. Whether you're still in college or you've already graduated, you may be eligible for tax deductions and credits if you have paid for higher education expenses or used student loans to help foot the bill. Such education tax benefits include the student loan interest deduction, the American opportunity tax credit (AOTC) and the lifetime learning credit (LLC). Note that you do not need to pay taxes on funds received through a student loan since this money is not considered taxable income. Get an overview of how student loans can impact your taxes during school, after you graduate and for years to come. The student loan interest deduction lets eligible taxpayers deduct up to $2,500 in student loan interest from their taxable income each year. With this deduction, the IRS focuses on the interest you paid to your lender. The actual loan payment itself isn't deductible – only the interest you've paid off is. You can deduct either $2,500 or the full amount of student loan interest you paid in the tax year, whichever is less. This deduction can also apply for either federal or private student loans, and it phases out when you reach certain income levels. For the 2024 tax year, income rules and thresholds are as follows: Single, head of household and qualifying surviving spouse: The deduction starts to phase out when your modified adjusted gross income (MAGI) reaches $80,000. At $95,000, the deduction disappears completely. Married filing jointly: The deduction phaseout begins once your joint MAGI reaches $165,000. If your joint income surpasses $195,000, you can no longer claim the student loan interest deduction. You must file taxes jointly if you're married. You paid interest on a qualified student loan during the tax year. You were legally obligated to pay interest on the student loan. When filing jointly, neither you nor your spouse were claimed as a dependent on someone else's tax return. The loan was taken out to pay for qualified higher education expenses during an academic period and paid or incurred within a reasonable period of time. To claim the student loan interest tax deduction, you'll take the following steps: Step 1: Consider your MAGI for the tax year. Confirm you earned below the threshold to qualify for the student loan interest deduction or a partial deduction. Step 2: Figure out how much student loan interest you paid during the tax year. When you pay at least $600 in qualified student loan interest, your lender should send you an IRS Form 1098-E (Student Loan Interest Statement). You can use this form to claim the student loan interest deduction when filing your taxes. Step 3: Claim the maximum deduction you're eligible for. Claim the deduction on your income tax returns (Form 1040). Unlike many other tax deductions, you don't have to itemize your tax return to take advantage of the student loan interest deduction. There are additional student loan tax benefits you can qualify for, including the American opportunity tax credit and the lifetime learning credit. The AOTC is worth up to $2,500 per student per year, although it can be claimed for only four total tax years per student. Up to 100 percent credit is available for the first $2,000 worth of qualified education expenses annually. After that, a 25 percent credit is available for the next $2,000 of qualified education expenses each year. The credit is gradually reduced for filers with the following MAGI (filers with MAGIs above these limits are not eligible): Single filers: Between $80,000 and $90,000 Joint filers: Between $160,000 and $180,000 The American opportunity tax credit is not a tax deduction. Although the two terms sound similar, the difference is significant. A $2,500 tax deduction simply reduces your taxable income by $2,500, but a $2,500 tax credit would reduce your tax bill by the entire amount. The student must be attending school at least half time for at least one academic term. The student must not have finished the first four years of a postsecondary program before the end of the tax year. The student must pursue a program that will end with a degree or other recognized credential. The student cannot have a felony drug conviction at the end of the tax year. The lifetime learning credit is worth up to 20 percent of the first $10,000 in eligible education expenses – or up to $2,000 – per year. In addition, it has more lenient requirements than the American opportunity tax credit. Like the American opportunity tax credit, the lifetime learning credit is a tax credit rather than a deduction. The income limits and phaseouts are also the same – a limit of $90,000 for single filers and $180,000 for joint filers applies with phaseouts beginning at $80,000 and $160,000 for single and joint filers, respectively. You can't apply both the American opportunity tax credit and the lifetime learning credit to the same education expenses. Generally, you'll need to choose one or the other in any given tax year. There is no minimum requirement for how many hours you need to be enrolled to qualify. There is no limit to how many years the credit can be claimed. Students do not need to be pursuing a degree or other recognized education credential; in other words, students can use this credit for courses focused on acquiring job skills or continuing education. The student must be enrolled or taking courses at an eligible educational institution. Navigating student loans on your taxes can be tricky, but you should now feel more informed as you move forward. You don't have to stop here, either. There are plenty of other resources available to help guide you through the process. IRS tax credit comparison chart: If you're still in school, you can use this handy chart to explore the American opportunity tax credit and the lifetime learning credit to find which best suits you. IRS Publication 970: This publication outlines tuition reductions, how to claim credits, how the interest deduction works and more. Other tax resources: If you feel unsure about filing your taxes yourself or which deductions or credits might apply to you, you can always contact a certified public accountant or explore other tax resources for help. Having to borrow money for college may not be ideal, but you can at least save some money when you file your taxes if you paid student loan interest and meet other eligibility requirements. There are also tax credits that can apply if you paid for higher education expenses in a tax year, though income requirements apply. Since each of these programs works differently and may or may not apply in your situation, you should arm yourself with information and take steps to reduce the amount of money you borrow and have to pay back. How does student loan forgiveness affect your taxes? If your student loan debt is forgiven entirely, or even a portion is forgiven, you could be on the hook for an unexpected tax bill. Similar to other debts canceled by a creditor, the IRS considers forgiven student loan debt taxable income. The amount of debt that is forgiven becomes part of your gross income for the year and is subject to income taxes. There are some exceptions. Student loan debt is not considered taxable income if it is eliminated through programs like the Public Service Loan Forgiveness. If your debt has been forgiven, speak with a tax professional to determine how your forgiven balances will be treated. How do 529 funds affect your taxes? According to the U.S. Securities and Exchange Commission (SEC), money in 529 plans can be used on a 100 percent tax-free basis when put toward qualified educational expenses. These expenses can include (but are not entirely limited to): Tuition and fees Room and board Books and supplies Computers and related equipment In most states, you can also use up to $10,000 in student loan payments from your 529 without incurring a penalty or having to pay taxes. These funds can be applied toward both federal and private student loans. What happens to your tax refund if you default on student loans? Defaulting on a student loan can hurt your credit score and cost you extra money. Your wages could be garnished and you could even have your tax refund withheld. If you're at risk of defaulting, take steps to set up a repayment plan or enroll in a forbearance program. Consider calling your loan servicer to create a plan to help you manage your monthly payments. You might be eligible for a hardship program, an income-driven repayment plan or a settlement.
Yahoo
4 days ago
- Business
- Yahoo
Bessent Predicts Republicans Reach SALT Truce Within 48 Hours
(Bloomberg) -- Treasury Secretary Scott Bessent said House and Senate Republicans can cut a deal on the state and local tax deduction within the next two days, resolving one of the key issues that has stymied President Donald Trump's economic legislation. Bezos Wedding Draws Protests, Soul-Searching Over Tourism in Venice US State Budget Wounds Intensify From Trump, DOGE Policy Shifts US Renters Face Storm of Rising Costs Commuters Are Caught in Johannesburg's Taxi Feuds as Transit Lags 'Both sides are working through and I think that we'll have a solution to that in the next 24-48 hours,' Bessent told reporters on Capitol Hill on Tuesday. The state and local tax, or SALT, deduction has vexed Republicans for weeks. A contingent of House lawmakers from high-tax states cut a deal in their chamber's version of the bill to increase the SALT cap to $40,000 from the $10,000 in current law. The Senate's proposal kept the deduction at $10,000 while lawmakers continue negotiations. Senator Markwayne Mullin, a Republican from Oklahoma, is running point on the SALT negotiations, talking with House members from New York, New Jersey and California who have threatened to block the bill unless it includes a $40,000 SALT cap. Mullin said on Tuesday that Senate Republicans are coming around to the $40,000 SALT cap, but that the $500,000 income threshold for the deduction is still being negotiated. Not everybody is going to be happy with what ultimately makes it into the bill, he said. 'I don't think we'll ever get to a deal,' Mullin said. 'We'll get to a spot to where we're going to have to put something in it and people are going to have to make the decision if it's worth voting against.' Representative Mike Lawler, a New York Republican, said he isn't budging from the House deal, adding 'that's what ultimately is going to be in the final package.' Bessent met with Senate Republicans on Tuesday to urge them to unite to pass Trump's tax package by a self-imposed July 4 deadline. He said he thinks senators can begin the multi-day voting process on the bill by Friday. The House will then have to vote on the legislation before it can go to Trump's desk for his signature next week. --With assistance from Erik Wasson and Maeve Sheehey. Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Inside Gap's Last-Ditch, Tariff-Addled Turnaround Push Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
