As Tax Day approaches on April 18, we asked our tax pros at Eide Bailly for some helpful items to keep in mind when filing your taxes this year. So, each Tuesday for the next five weeks will be “Tax Tuesday” where we will ask a different question to our tax pro.
The Tuesday schedule is below, so be sure to check back each Tuesday for a new question and answer.
QUESTION #1 (Tuesday, February 21): Who can be claimed as a dependent on a tax return?
Eide Bailly Tax Pro: This can be a very complex answer at times, but in terms of whether or not one of your children can be claimed as a dependent for the year, the answer could be your son, daughter, stepchild, eligible foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, adopted child or an offspring of any of them.
The child must be under age 19 or, if a full-time student, under age 24. There’s no age limit if the child is permanently and totally disabled. The child must live with you for more than half the year, but several exceptions apply.
Also, the child may have a job, but they cannot provide more than half of their own support. There are many other tests for individuals that are not within the above parameters that could still possibly qualify as a dependent on your tax return.
QUESTION #2 (Tuesday, February 28): Is there a Child Tax Credit on my 2022 Tax Return?
Eide Bailly Tax Pro: Yes. This credit is again available on an individual’s 2022 income tax return, with a maximum of up to $2,000 per child. If the child is under the age of 17 at the end of 2022 and is a dependent on your tax return and does not file a joint return with another person, that child could be eligible for the credit.
Further, the child you’re claiming must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister or a descendant of any of those people (e.g., a grandchild, niece or nephew). There are other requirements to be met, including income limits ($400,000 for joint filers, $200,000 for others), that need to be taken into account.
QUESTION #3 (Tuesday, March 7): Do I qualify for any tax benefits for paying my child’s college tuition?
Eide Bailly Tax Pro: If you have a child in college or graduate school, you may not qualify for one of these credits if your income is too high (phaseout range of $80,000–$90,000 for single filers; $160,000–$180,000 for joint filers), but the child might qualify:
American Opportunity credit. This tax break covers 100% of the first $2,000 of tuition and related expenses and 25% of the next $2,000 of expenses. The maximum credit, per student, is $2,500 per year for the first four years of postsecondary education.
Lifetime Learning credit. This tax break — up to $2,000 per tax return — is available for postsecondary education expenses beyond the first four years.
Education tax credits are taken predominately by parents, but students who pay their own college expenses, file their own tax returns and are not claimed as dependents on anyone else’s return could also be eligible to claim the credit.
QUESTION #4 (Tuesday, March 14): Are charitable donations still deductible on my tax return?
With the increased standard deduction in effect for 2022 ($25,900 for joint filers, $12,950 for single filers), many taxpayers no longer have a total sum of itemized deductions that exceed this amount. Charitable donations are itemized deductions, so depending on a taxpayer’s circumstance, they may take the higher standard deduction rather than itemizing deductions (which include a maximum deduction of $10,000 of state & local taxes, mortgage interest, charitable donations, a limited amount of medical expenses, and other expenses).
If you take the standard deduction, you technically are not realizing a tax benefit for charitable donations. There was a provision in prior tax years that allowed a charitable donation of up to $600, above the line of itemized deductions, but that provision has expired.
QUESTION #5 (Tuesday, March 21): Can I deduct my medical expenses?
Similar to charitable donations discussed above, medical expenses are itemized deductions, so the deductibility hinges on whether you take the standard deduction or itemize deductions, whichever amount provides the highest deduction. When determining which ones could qualify as an itemized deduction component, only qualified medical expenses that exceed 7.5% of your adjusting gross income can be included in itemized deductions.
The IRS allows you to deduct unreimbursed payments for preventative care (physical exams), treatment, surgeries, dental and vision care, visits to psychologists and psychiatrists, prescription medications, items such as glasses, contacts, false teeth and hearing aids, and expenses that you pay to travel for qualified medical care. If you pay for your medical expenses using money from a flexible spending account or health savings account, those expenses aren’t deductible because the money in those accounts is already tax-advantaged.