Tax Deduction For Working At Home

If you work from home either as an employee or self-employed, you can qualify for a home office tax deduction.

Here are some of the guidelines.

Exclusive work place

You must use part of your home regularly and exclusively as:

* A principal place of business
* A place where you meet your patients, clients or customers regularly
* A place that is a separate structure from your home that is used for business

Use as storage, rental, etc.

If using the property for storage, rental or daycare services, you should use the property regularly, but not exclusively.

Other guidelines

The amount you deduct is measured by how much of your home you use for business. Your deductions will be limited if your gross income from your business is less than the total business expenses.

In the case of daycare services and storage of inventory and product samples, do check if the special rules for those covers your situation.

For the self-employed, use Form 8829 for your home office deduction, and then report it on line 30 of your Form 1040 Schedule C (Profit or Loss from Business).

If you are an employee, you must establish that the regular and exclusive use of your home for business is convenient to your employer.

LINKS

Publication 587: http://www.irs.gov/pub/irs-pdf/p587.pdf

Form 8829: http://www.irs.gov/pub/irs-pdf/f8829.pdf

Form 8829 Instructions: http://www.irs.gov/pub/irs-pdf/i8829.pdf

Schedule C, Profit or Loss from Business: http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

Read more »

Become Better Teachers

A recent report on comparative educational systems suggests that for the United States to improve the quality of its public schools, it needs to raise the status of teachers. This means recruiting candidates that are more qualified and paying them more. It also means them extensive training.

Education in the United States is lagging behind other well-developed countries. Based on an international achievement test (Pisa) headed by Andreas Schleicher, American teenagers only scored 15th in reading, 19th in science and 27th in math. These poor student performances have drawn attention to the inferior quality of teachers. Schleicher believes the country should address this now.

Other countries such as Korea, Singapore and Finland, which scored among the highest in the test, credit their students’ performance to the overall quality of their teachers. These countries only hire top college graduates for teaching positions. They also give them proper mentoring and other help in the classroom. These countries also take extra steps to attribute the teaching profession with respect and prestige.

“Teaching in the U.S. is unfortunately no longer a high-status occupation,” Schleicher says. “Despite the characterization of some that teaching is an easy job, with short hours and summers off, the fact is that successful, dedicated teachers in the U.S. work long hours for little pay and, in many cases, insufficient support from their leadership.”

Following the results of the latest Pisa, Schleicher wrote a new report titled “What the U.S. Can Learn from the World’s Most Successful Education Reform Efforts.” In the report, he enumerated the improvements education reformists should concentrate on: adopting common academic standards, developing better tests in diagnosing students, training more effective school leaders and, most importantly, making a concerted effort to raise the status of the teaching profession.

It seems that Schleicher is not alone in stressing the latter. President Obama has also been quoted in saying, “In South Korea, teachers are known as ‘nation builders,’ and I think it’s time we treated our teachers with the same level of respect.”

Schleicher believes that, initially, universities in the United States should become more selective and rigorous in admitting those who want a degree in education.

Salary is also something that needs improvement. According to the Organization for Economic Cooperation and Development (O.E.C.D.), the average veteran public school teacher in the U.S. earned only $44,172 in 2008. This is 40% below the average salary of other American college graduates. In contrast, Finland’s average salary for educators is 13% below the average for other college graduates.

Apparently, budgeting is not a problem. Rather, the problem lies in the allocation of funds, which means that raising the average teacher’s salary should not be too difficult. The U.S. spends a considerable amount of money on public education. It’s only second to Luxembourg, according to the O.E.C.D. “You can spend a lot of money on education, but if you don’t spend it wisely, on improving the quality of instruction, you won’t get higher student outcomes,” Schleicher said.

Read more »

HAMP: Mortgage Payments Easier

The Home Affordable Modification Program (HAMP) is a $75 billion program under the Making Home Affordable Program. It lowers your monthly mortgage payment to 31% of your verified monthly gross (pre-tax) income to make your payments more affordable. The typical HAMP modification results in a 40% drop in a monthly mortgage payment. 18% of HAMP homeowners reduce their payments by $1,000 or more.

How do I qualify?

If you meet all of the following requirements, then you might qualify:

* • You are the primary resident of the home.
* • You got your mortgage on or before January 1, 2009.
* • You have a mortgage payment that is more than 31% of your monthly gross (pre-tax) income.
* • You owe up to $729,750 on your home.
* • You have do have a financial need and are in danger of falling behind.
* • You are earning enough to support the modified payment.
* • You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

NOTE: The guidelines above are general in nature. Contact your mortgage servicer to see if you qualify for HAMP.

What do I do after I qualify?

If you’re ready to get the process started, put your financial papers in order and find out if your loan servicer is participating in HAMP (one of 38 organizations). Do note that all loans owned by Fannie Mae and Freddie Mac are required to participate in HAMP. Since the program is based on voluntary participation by lenders, excluding loans that were owned by Fannie or Freddie, the servicer must be on the list for your loan to be eligible for modification. Servicers are added to the list as they sign on to the program.

If you qualify for HAMP and have a second mortgage, you may also qualify for the Second Lien Modification Program (2MP).

LINKS

* Making Home Affordable HAMP page: http://www.makinghomeaffordable.gov/programs/lower-payments/Pages/hamp.aspx
* More info on how to apply can be found at: http://www.makinghomeaffordable.gov/get-assistance/request-modification/Pages/default.aspx

Read more »

Deduct Some Of Your Office Work Expenses

If you’ve incurred expenses in the course of your work for your company, you can deduct some of them from your tax return.

Here are some qualified employee business expenses that you can factor into your tax return:

* Travel costs or use of car for business (with consideration if away from home)
* Entertainment and food expenses
* Home expenses or use of your home for business purposes
* Work-related education expenses
* Supplies and tools used for work
* Miscellaneous qualified expenses

Be sure to keep records of all your expenses that you will use for deductions. If in doubt, do check with the IRS.gov website, or call 800-829-3676.

Employer’s plans

However, if your employer has a reimbursement system, then you cannot include the payments in your gross income. That also means that you cannot deduct any of the reimbursed amounts.

An employer’s plan must meet the three requirements:

1) You must have paid or had expenses that are deductible while doing your job as an employee.

2) You must keep accountable records for your employer, and submit them at the required time.

3) Any excess reimbursements must be returned before a stated deadline or within a reasonable time.

If your reimbursements are non-accountable, then the payments should be included in your W-2. You should itemize your expense deductions. Use IRS Form 2106 or 2106-EZ, and then attach it to your Form 1040.

Only employee business expenses over 2% of your adjusted gross income can be used for deductions.

LINKS

* Publication 552: http://www.irs.gov/pub/irs-pdf/p552.pdf
* Publication 529: http://www.irs.gov/pub/irs-pdf/p529.pdf

Read more »

Health Plans For Those With Pre-Existing Conditions

If you have a pre-existing medical condition, then chances are you’ve had trouble in the past with trying to get a health policy – let alone one suitable to your needs. However, under new health laws, you shouldn’t have any trouble finding one addresses your pre-existing condition.

The federal government has put $5 billion into this program, and you can get about $320 to $570 on average. However, state PCIP programs can give up to $890, like in Connecticut.

Pre-existing Condition Insurance Plans (PCIPs)

27 states have their own version of a pre-existing condition insurance plan. The others push HHS plans in their own areas. These plans generally have lower premiums.

Federal PCIPs have three options: standard coverage; extended, where the deductibles are lower, but you’ll get higher premiums; and an option where you have a savings account married to a high deductible. In the case of state-offered plans, you may also get more than one option.

If you wish to find out more about PCIPs in your state, check on our links at the end of this article, or call 866-717-5826.

Qualifications

- You must be uninsured for at least 6 months to be eligible. If you’ve enrolled in a high-risk state pool or private insurance, then you do not qualify. The same goes for the unemployed on COBRA.

- For a federal PCIP, you need proof that you were denied coverage for your pre-existing condition, or that even if your coverage was approved, they did not cover the pre-existing condition’s costs. Do make sure that you did not buy into the policies mentioned. If you’re uninsured, you need at least a denial letter from a carrier.

- State PCIPs have fewer requirements. In general, you might only need a doctor’s letter or confirmation from a healthcare provider that you do have a pre-existing condition recognized under the state PCIP.

- Always keep all documents that show denials of coverage or exceptions. You will be able to use this in some cases.

LINKS

* PCIP Website: http://www.pcip.gov
* Interactive PCIP Map: http://www.pcip.gov/StatePlans.html

Read more »