Check List of Things to Bring $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Last Year Tax Return (If this is your first time coming to see me) Social Security numbers and dates of birth for all dependents W-2 Forms for every job that you worked the tax year All and any 1099 Form that you received Year-end statements for mutual funds K-1 forms from partnerships, corporations, & estates Rental or Self-employment income and expense Purchase and sale information for anything sold during the rear All other statement of income IRA year end statements Medical expenses Records of estimated taxes paid to the IRS or State Property tax statement that were paid in the current tax year 1098 Forms for Mortgage or student loan interest Donations to charity – Cash and Non Cash Volunteer expenses and mileage Amounts paid for higher education Job and investment related expenses Child Care provider’s name, address, SS number or EIN number and amount paid Amount of credit increased. The maximum amount of the credit has increased. The most you can get for 2010 is: $3,050 if you have one qualifying child, $5,036 if you have two qualifying children, $5,666 if you have three or more qualifying children, or $457 if you do not have a qualifying child. Earned income amount increased. The maximum amount of income you can earn and still get the credit has increased for 2010. You may be able to take the credit if: You have three or more qualifying children and you earn less than $43,352 ($48,362 if married filing jointly), You have two qualifying children and you earn less than $40,363 ($45,373 is married filing jointly), You have one qualifying child and you earn less then $35,535 ($40,545 if married filing jointly), or You do not have a qualifying child and you earn less then $13,460 ($18,470 if married filing jointly). Investment income amount. The maximum amount of investment income you can have and still get the credit is still $3,100 for 2010. Advance payment of the credit. If you get the advance payments of the credit from your employer with your pay, the total advance payments you get during 2010 can be as much as $1,830. Unemployment Compensation For any tax year beginning in 2009, each recipient of unemployment compensation can exclude from gross income up to $2,400 of the amount he or she received during the year. Standard Deduction Increased 2009 Changes The standard deduction for people who do not itemize their deductions on Schedule A (Form 1040) is, in most cases, higher for 2009 than it was for 2008. In addition to the annual increase due to inflation adjustments and the increase allowed for the deduction for certain real estate taxes and a net disaster loss, your 2009 standard deduction is increased by any state or local sales tax imposed on the purchase of a qualified motor vehicle after February 16, 2009, and before January 1, 2010. For details, see Deduction for Sales and Excise Taxes Imposed on Purchase of New Motor Vehicles. To figure your 2009 standard deduction, see your tax return instructions booklet. However, you must use Schedule L (Form 1040A or 1040) to figure your standard deduction if: You paid state or local real estate taxes in 2009. You have a net disaster loss on Form 4684, line 18, or You paid state or local sales or excise taxes (or certain other taxes or fees in a state without a sales tax) on the purchase of any new motor vehicle(s) after February 16, 2009, and before January 1, 2010. Deduction for Sales and Excise Taxes Imposed on Purchase of New Motor Vehicles In 2009, you can deduct the state or local sales and excise taxes imposed on the purchase of a qualified motor vehicle after February 16, 2009, and before January 1, 2010. A qualified motor vehicle includes a passenger automobile, light truck, or motorcycle, the original use of which begins with that purchaser and that has a gross vehicle weight rating of 8,500 pounds or less. A qualified motor vehicle also includes a motor home, the original use of which begins with that purchaser. The amount of tax you are able to deduct is limited to the tax that is imposed on the first $49,500 of the purchase price of the vehicle. The deduction is phased out over a $10,000 range that begins when modified adjusted gross income is more than $125,000 ($250,000 if married filing a joint return). No deduction is allowed when modified adjusted gross income is equal to or more than $135,000 ($260,000 if married filing a joint return). The new deduction can be used to increase the amount of your standard deduction or you can take it as an itemized deduction (if you are not electing to take the state and local general sales tax deduction). Penalty for Failure to File Income Tax Return Increased If you do not file your return by the due date (including extensions) you may have to pay a failure-to-file penalty. For income tax returns required to be filed after 2008, the failure-to-file penalty for returns filed more than 60 days after the due date (including extensions) is increased. In this situation, the minimum penalty is the smaller of $135 or 100% of the unpaid tax. Increase in Personal Casualty and Theft Loss Limit Generally, a personal casualty or theft loss must exceed $500 to be allowed for 2009. This is in addition to the 10% of AGI limit that generally applies to the net loss. Discharge of Qualified Principal Residence Indebtedness The Emergency Economic Stabilization Act of 2008 extended the exclusion from gross income for the discharge of qualified principal residence indebtedness by an additional 3 years. The exclusion now applies to debt discharged after 2006 and before 2013. See Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), and Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals), for more information. First-Time Homebuyer Credit First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify WASHINGTON — A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers. The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase. The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase. But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence. For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns. A new version of Form 5405, First-Time Homebuyer Credit, will be available around late December, 2009. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return. A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the 2008 Form 5405. Income Limits Rise The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. New Requirements Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law: Dependents are not eligible to claim the credit. No credit is available if the purchase price of a home is more than $800,000. A purchaser must be at least 18 years of age on the date of purchase. For Members of the Military Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011. First-Time Homebuyer Credit Updated Nov. 24, 2009 Homebuyer Credit Expanded and Extended The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return. The new law also: Authorizes the credit for long-time homeowners buying a replacement principal residence. Raises the income limitations for homeowners claiming the credit. News release 2009-108 has the details, as do two new IRS videos in English and Spanish. Members of the military, Foreign Service and intelligence community serving outside the U.S. should also be aware of new benefits in the law that apply particularly to them. Following is general information for first-time homebuyers who settled on a new home on or before Nov. 6, 2009. For 2008 Home Purchases The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year. For 2009 Home Purchases The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1. However, the new Worker, Homeownership and Business Assistance Act of 2009 has extended the deadline. Now, taxpayers who have a binding contract to purchase a home before May 1, 2010, are eligible for the credit. Buyers must close on the home before July 1, 2010. [Added Nov. 12, 2009] For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase. First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. News release 2009-27 has more information on these options. General Information Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit: Applies only to homes used as a taxpayer's principal residence. Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar. Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed. The credit is claimed using Form 5405, which you file with your original or amended tax return. Sale of Main Home Gain from the sale or exchange of the main home is no longer excludable from income if allocable to periods of nonqualified use. Generally, nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home (with certain exceptions). A period of nonqualified use does not include: 1. Any portion of the 5-year period ending on the date of the sale or exchange that is after the last date you (or your spouse) use the property as a main home; 2. Any period (not to exceed an aggregate period of 10 years) during which you or your spouse is serving on qualified official extended duty: o o o o As a member of the uniformed services, As a member of the Foreign Service of the United States, or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. To figure the portion of the gain that is allocated to the period of nonqualified use, multiply the gain by the following fraction: total nonqualified use during period of ownership after 2008 total period of ownership Health/Medical-Related Tax Changes Archer Medical Savings Accounts (MSAs) For 2008 and 2009, the minimum annual deductible, maximum annual deductible, and the maximum out-of-pocket expenses limit have increased. Health Coverage Tax Credit Information on credit increase, new enrollees, TAA recipients, and coverage under employee benefit plans. Health Flexible Spending Arrangements (FSAs) A special rule allows amounts in a health FSA to be distributed to reservists ordered or called to active duty. Health Savings Accounts (HSAs) The minimum/maximum annual deductible, out-of-pocket expenses, and maximum contribution amounts have increased for 2008 and 2009. Long-Term Care Premiums For 2008 and 2009, the maximum amount of qualified long-term care premiums includible as medical expenses has increased. Education Savings Bond Exclusion Education Savings Bond Exclusion An individual who redeems qualified U.S. saving Bonds to pay for higher education expenses may be able to exclude interest income from gross income. 2009 For 2009, the amount of your interest exclusion is phased out (gradually reduced) if your filing status is married filing jointly or qualifying widow(er) and your modified adjusted gross income (AGI) is between $104,900 and $134,900. You cannot take the exclusion if your modified AGI is $134,900 or more. For all other filing statuses, your interest exclusion is phased out if your modified AGI is between $69,950 and $84,950. You cannot take the exclusion if your modified AGI is $84,950 or more. For more information, see chapter 11 in Publication 970, Tax Benefits for Education. Hope and Lifetime Learning Credits 2009 and 2010 Changes For tax years 2009 and 2010, there is a new education credit called the American opportunity tax credit (AOC). This is a modification of the Hope Credit. The maximum amount of the AOC is $2,500 per student. The credit is phased out (gradually reduced) if your modified adjusted gross income (AGI) is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). Exception. For 2009, if you claim a Hope credit for a student who attended a school in a Midwestern disaster area, you can choose to figure the amount of the credit using the previous rules. However, you must use the previous rules in figuring the credit for all students for which you claim the credit. The credit can be claimed for the first four years of post-secondary education. Previously the credit could be claimed for only the first two years of post-secondary education. Generally, 40% of the AOC is now a refundable credit for most taxpayers, which means that you can receive up to $1,000 even if you owe no taxes. The term "qualified tuition and related expenses" has been expanded to include expenditures for "course materials." For this purpose, the term "course materials" means books, supplies, and equipment needed for a course of study whether or not the materials must be purchased from the educational institution as a condition of enrollment or attendance. For more information, see chapter 2 of Publication 970. Income limits for Hope and lifetime learning credit reduction increased. For 2009, the amount of your Hope or lifetime learning credit is phased out (gradually reduced) if your modified adjusted gross income (AGI) is between $50,000 and $60,000 ($100,000 and $120,000 if you file a joint return). You cannot claim a Hope or lifetime learning credit if your modified AGI is $60,000 or more ($120,000 or more if you file a joint return). For more information, see chapters 3 and 4 in Publication 970. Eligibility for the Hope credit. For 2009, you can claim a Hope credit only if at least one eligible student is attending an eligible educational institution in a Midwestern disaster area and you do not claim an American opportunity credit for any other student in the same year. Student Loan Interest Deduction 2009 For 2009, the amount of the student loan interest deduction is phased out (gradually reduced) if your filing status is married filing jointly and your modified adjusted gross income (AGI) is between $120,000 and $150,000. You cannot take the deduction if your modified AGI is $150,000 or more. For all other filing statuses, your student loan interest deduction is phased out if your modified AGI is between $60,000 and $75,000. You cannot take a deduction if your modified AGI is $75,000 or more. For more information, see chapter 5 in Publication 970 Tax Benefits for Education. Deduction for Credit or Debit Card Convenience Fees If you pay your income tax (including estimated tax payments) by credit or debit card, you can deduct the convenience fee you are charged by the card processor to pay using your credit or debit card. The deduction is claimed for the year in which the fee was charged to your card as a miscellaneous itemized deduction on line 23 of Schedule A (Form 1040) (and is subject to the 2% of adjusted gross income floor). Decreased Estimated Tax Payments for Qualified Individuals With Small Businesses For 2009, qualified individuals with small businesses may be eligible to make smaller estimated tax payments. If you qualify, your required annual payment for 2009 is the smaller of 90% of the tax shown on your 2008 tax return or 90% of the tax shown on your 2009 tax return. You must check box F in Part II on Form 2210 or box C on Form 2210-F to certify that you qualify. You are a qualified individual if: More than 50% of your gross income was from a business that had an average of fewer than 500 employees in 2008, and Your adjusted gross income in 2008 was less than $500,000 ($250,000 if you are filing married filing separately for 2009). Adoption Benefits Increased 2009 For 2009, the maximum adoption credit has increased to $12,150. Also, the maximum exclusion from income for benefits under your employer's adoption assistance program has increased to $12,150. These amounts are phased out if your modified AGI is between $182,180 and $222,180. You cannot claim the credit or exclusion if your modified AGI is $222,180 or more. Child's Investment Income 2008 Increase in age of children whose investment income is taxed at parent's rate. The rules regarding the age of a child whose investment income may be taxed at the parent's tax rate have changed for 2008. These rules continue to apply to a child under age 18 at the end of the year but, beginning in 2008, will also apply in certain cases to a child who either: Was age 18 at the end of 2008 and did not have earned income that was more than half of the child's support, or Was a full-time student over age 18 and under age 24 at the end of 2008 and did not have earned income that was more than half of the child's support. A student is a child who during any part of 5 calendar months of the year was enrolled as a full-time student at a school, or took a full-time, on-farm training course given by a school or a state, county, or local government agency. A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Form 8615 is used to figure the child's tax. These rules also apply to parents who elect on Form 8814 to report their child's income on the parents' return. Increase in investment income amount. The amount of taxable investment income these children can have without it being subject to tax at the parent's rate has increased to $1,800 for 2008. 2009 The amount of taxable investment income a child can have without it being subject to tax at the parent's rate has increased to $1,900 for 2009. Earned Income for Additional Child Tax Credit 2009 For 2009, the amount your earned income must exceed to claim the additional child tax credit is reduced to $3,000. 2010 For 2010, the amount your earned income must exceed to claim the additional child tax credit is $3,000. Alternative Minimum Tax (AMT) 2009 Changes The following changes to the AMT went into effect for 2009. For more information , see Form 6251, Alternative Minimum Tax--Individuals, and its instructions. AMT exemption amount increased. The AMT exemption amount has increased to $46,700 ($70,950 if married filing jointly or qualifying widow(er); $35,475 if married filing separately). AMT exemption amount for a child increased. The AMT exemption amount for a child whose unearned income is taxed at the parent's tax rate has increased to $6,700. Qualified motor vehicle tax allowed against AMT. If you claim a regular tax deduction for any state or local sales or excise tax on the purchase of a new motor vehicle, that tax is also allowed as a deduction for the AMT. Tax-exempt interest on specified private activity bonds issued in 2009 or 2010 exempt from AMT. Tax-exempt interest on specified private activity bonds issued in 2009 or 2010 is not an item of tax preference and therefore is not subject to the AMT. A refunding bond is treated as issued on the date of the issuance of the refunded bond (or, in the case of a series of refundings, the original bond). However, tax-exempt interest on a specified private activity bond issued in 2009 or 2010 to currently refund a private activity bond issued after 2003 and before 2009 is not an item of tax preference. Alternative tax net operating loss deduction (ATNOLD). The 90% limit on the ATNOLD does not apply to the portion of an ATNOLD attributable to any 2008 or 2009 loss you elected to carry back more than 2 years under section 172(b)(1)(H) of the Internal Revenue Code. Social Security and Medicare Taxes 2009 Changes The maximum amount of wages subject to the social security tax for 2009 is $106,800. There is no limit on the amount of wages subject to the Medicare tax. 2010 Changes The maximum amount of wages subject to the social security tax for 2010 is $106,800. There is no limit on the amount of wages subject to the Medicare tax. Standard Mileage Rate 2009 For 2009, the standard mileage rate for the cost of operating your car for business use is 55 cents per mile. Car expenses and use of the standard mileage rate are explained in chapter 4 of Publication 463, Travel, Entertainment, Gift, and Car Expenses. Medical- and move-related mileage. For 2009, the standard mileage rate for the cost of operating your car for medical reasons or as part of a deductible move is 24 cents per mile. See Transportation under What Medical Expenses Are Includable in Publication 502 or Travel by car under Deductible Moving Expenses in Publication 521, Moving Expenses.. Charitable-related mileage. For 2009, the standard mileage rate for the cost of operating your car for charitable purposes remains 14 cents per mile. CREDIT FOR BUSINESSES Work Opportunity Credit Two new targeted groups have been added to the work opportunity credit. Unemployed veterans. Disconnected youth. Generally, an unemployed veteran is one who has been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date and who receives unemployment compensation for not less than 4 weeks during the 1-year period ending on the hiring date. A disconnected youth is one who is certified as: Being at least age 16 but not age 25 or older on the hiring date; Not attending any high school, technical school, or post-secondary school during the 6-month period ending on the hiring date; Not being regularly employed during that 6-month period; and Not being readily employable due to a lack of having a sufficient number of basic skills. This applies to employees who begin work after 2008 and before 2011. Use the Form 5884, Work Opportunity Credit, to claim the credit State Taxes – Louisiana Deductions For School Tuition, Home School Educational Expenses, And Public School Educational Expenses The following income tax deductions were enacted by Acts 2008 2nd Ex. Sess. No. 8, and amended by Acts 2009, No. 460 and Acts 2009, No. 451, to allow tuition and fees paid on or after January 1, 2009, to be deducted on the 2009 income tax return that is due May 15, 2010. 1. Revised Statute 47:297.10—income tax deduction for elementary and secondary school tuition This statute allows an income tax deduction for amounts paid during the tax year by a taxpayer for tuition and fees required for a dependent's enrollment in a nonpublic elementary or secondary school which complies with the criteria set forth in Brumfield , et al. v. Dodd, et al. 425 F. Supp. 528 and Section 501(c)(3) of the Internal Revenue Code or to any public elementary or secondary laboratory school that is operated by a public college or university. The deduction is for 50 percent of the actual amount of tuition and fees paid by the taxpayer per dependent, limited to $5,000. The total amount of the deduction may not exceed the taxpayer’s total taxable income. For the purposes of the deduction, tuition also includes the following expenses: a. Purchase of school uniforms required by schools for general day-to-day use. b. Purchases of textbooks, curricula, or other instructional materials required by schools. c. Purchase of school supplies required by schools. 2. Revised Statute 47:297.11—income tax deduction for certain educational expenses for home-schooled children This statute allows an income tax deduction for educational expenses paid during the tax year by a taxpayer for home-schooling children. The deduction is for 50 percent of the actual qualified educational expenses paid for the home-schooling per dependent, limited to $5,000. Qualified educational expenses include amounts paid for the purchase of textbooks and curricula necessary for home-schooling. The total amount of the deduction may not exceed the taxpayer’s total taxable income. 3. Revised Statute 47:297.12—income tax deduction for fees and other educational expenses for a quality public education This statute allows an income tax deduction for the following fees or other amounts paid during a tax year by a taxpayer for a quality education of a dependent child enrolled in a public elementary or secondary school: a. Purchases of school uniforms required by the school for general dayto-day use. b. Purchases of textbooks, curricula, or other instructional materials required by the school. c. Purchases of school supplies required by the school. The income tax deduction is for 50 percent of the amount paid by the taxpayer per dependent, limited to $5,000. The total amount of the deduction may not exceed the taxpayer’s total taxable income. Summary 1. The deduction is effective beginning with the 2009 tax year, which is due by May 15, 2010. 2. The school expense deductions are deductions from Louisiana taxable income—they are not tax credits. a. The deduction will be reported on Schedule E of the Louisiana Resident Income Tax Return, Form IT-540, as an adjustment to income and the Louisiana School Expense Deduction Worksheet must be attached to your return. b. The deduction is allowed for Louisiana residents only. Part-Year residents may take the deduction for school expenses paid in Louisiana during the time a person was a Louisiana resident. The deduction will be reported on the Nonresident and Part-Year Resident (NPR) Worksheet of the Louisiana Nonresident and Part-Year Resident Income Tax Return, Form IT-540B, as an adjustment to income and the Louisiana School Expense Deduction Worksheet must be attached to your return. c. The deduction is not available to nonresidents. 3. Taxpayers must retain all expense receipts as proof of the amounts paid. 4. The deduction is for 50 percent of the costs paid per dependent, limited to $5,000. a. If a dependent’s expenses exceed $10,000, the deduction is limited to $5,000. If one dependent’s expenses are $8,000 and the second dependent’s expenses are $12,000—the total deduction allowed is $4,000 for the first dependent and $5,000 for the second dependent for a total deduction of $9,000. b. If one dependent qualifies for two or more deductions and the dependent’s expenses exceed $10,000, the combined total of the deductions is limited to $5,000. If the dependent attended a school that qualifies for the deduction for elementary and secondary school tuition and the expenses are $9,000—the deduction allowed is $4,500. If the dependent also attended a public school in the fall and the expenses are $1,500—the second deduction allowed is limited to $500, for a total deduction of $5,000. c. If one dependent attended 2 different schools qualifying for the same deduction and the dependent’s expenses exceed $10,000, the deduction is limited to $5,000. If the dependent attended a school that qualifies for the deduction for elementary and secondary school tuition and the expenses are $6,000 and in the fall attended a different qualifying school whose expenses are $16,000—the deduction allowed is $5,000. 5. The deduction is for the parent or guardian who claims the student as a dependent for the current tax year or claimed the student as a dependent on the prior year’s return. For example, in order to claim the deduction for 2009, the taxpayer must have claimed the student as a dependent on their 2009 return or their 2008 return. If the student’s parents do not file a joint return and alternate claiming the child as a dependent, both parents are allowed to claim the deduction for the expenses that each paid for the year. However, if a dependent’s expenses exceed $10,000, the deduction is limited to $5,000. If one parent’s paid expenses are $6,000 and the other parent’s paid expenses are $6,000—the total deduction allowed is $2,500 for each parent for a total deduction of $5,000 for the dependent. What is the Louisiana Citizens Insurance Tax Credit? In December 2006 the Louisiana Legislature enacted Revised Statute 47:6025, which authorized a refundable income tax credit for the LA Citizens assessments that resulted from Hurricanes Katrina and Rita. This credit is available to people who paid the LA Citizens assessments in addition to their homeowner’s or property’s insurance premium. The LA Citizens assessments are a result of losses on insured property caused by Hurricanes Katrina and Rita. In years when there are no large catastrophic losses, LA Citizens collects enough premiums to cover their cost of operations. However, the massive losses of Hurricanes Katrina and Rita cost LA Citizens over $1.2 Billion, which created a deficit. LA Citizens assessments on home and property insurance policies in Louisiana were used to partially fund this deficit left by Hurricanes Katrina and Rita. How do I determine the amount of the credit? Premium notices that include LA Citizens assessments due to Hurricanes Katrina and Rita are eligible for the credit. The LA Citizens assessments are listed separately from the normal premium amount on the declaration page of your homeowner’s or property’s insurance premium notice. The declaration page names the policyholder, describes the property or liability to be insured, the type of coverage, and policy limits. Some insurance companies may include a supplemental schedule with the declaration page that itemizes the LA Citizens assessments. LA Citizens assessment charges may include any or all of the following (your insurer’s description may vary slightly from the references below): Louisiana Citizens FAIR Plan Regular Assessment Recoupment Surcharge Louisiana Citizens Coastal Plan Regular Assessment Recoupment Surcharge Louisiana Citizens FAIR Plan Emergency Assessment Louisiana Citizens Market Equalization Charge To determine the amount of the credit that can be claimed, add the assessment charges for the four items above. If only one of the items appears on your insurance bill, that amount is the amount of the credit. Before the credit can be claimed, the assessment amounts must have been paid to the insurance company directly by the homeowner or property owner or by the homeowner’s or property owner’s escrow company. Returns filed electronically: Homeowners or property owners must retain their homeowner’s or property’s insurance declaration page and any supplemental pages that show the separate line item charges for four years and be able to produce the documents in the case of an audit. School Readiness Tax credit Home : Individual : School Readiness Tax credit School Readiness Tax Credits In 2007, the Louisiana Legislature passed Act 394, which enacted Revised Statutes 47:61016109 to provide a package of tax credits known as the School Readiness Tax Credits. These credits allow tax breaks to families, child care providers, child care directors and staff, and businesses that support child care in an effort to encourage child care facilities to voluntarily participate in the quality rating program administered by the Louisiana Department of Social Services under the name of Quality Start Child Care Rating System. The Quality Start web site also includes a search feature that can be used to determine the quality rating for child care centers located in parishes throughout the state. The School Readiness Tax Credits, which are effective for income tax years beginning on or after January 1, 2008, and franchise tax years beginning on or after January 1, 2009, are as follows: 1. Child care expense tax credit -- (R.S. 47:6104) 2. Child care provider tax credit -- (R.S. 47:6105) 3. Credit for child care directors and staff -- (R.S. 47:6106) 4. Tax credit for business-supported child care -- (R.S. 47:6107) 5. Tax Credit For Donations To Resource And Referral Agencies -- (R.S. 47:6107) To provide additional guidance for the School Readiness Tax Credits, the Louisiana Department of Revenue (LDR) and the Department of Social Services adopted LAC 61:I.1903. 1. Child Care Expense Tax Credit—R.S. 47:6104 A school readiness child care expense tax credit is allowed for taxpayers who have a qualified dependent under the age of six who, during the year, attended a child care facility that participates in the quality rating program and has earned at least two stars. The school readiness child care expense credit is based on the quality rating of the child care facility and is a percentage of the existing Louisiana child care expense credit provided for by R.S. 47:297.4. The school readiness child care expense tax credit is in addition to the regular child care expense credit. The percentage of the regular child care expense credit allowed for the school readiness tax credit is based on the child care facility’s quality rating as follows: Quality Rating of Child Care Facility Percent of Louisiana Child Care Tax Credit Five Star 200% Four Star 150% Three Star 100% Two Star 50% One Star or not participating in Quality Start 0 Parents with multiple qualifying children are allowed credit for each child with the credits separately calculated. Also, if a child receives services from more than one child care facility during the year, the credit is calculated based on the facility with the highest quality rating. Refundable credit—The school readiness child care expense tax credit is refundable for taxpayers whose federal adjusted gross income is $25,000 or less. The refundable credit is claimed by resident taxpayers on Line 20 of the Louisiana income tax return, Form IT-540, and Line 21 of Form IT-540B for nonresidents. Nonrefundable credit—Taxpayers whose federal adjusted gross income is greater than $25,000 may apply the credit to their tax liability and if the credit is more than the taxpayer’s liability, the remaining credit can be carried forward and applied to later tax years. Excess credits can be carried forward for up to five years. The nonrefundable credit is claimed by resident taxpayers on Line 12D of the Louisiana income tax return, Form IT-540, and Line 13D of Form IT-540B for nonresidents. Proof of Credit Taxpayers who claim the school readiness child care expense credit must obtain a Louisiana School Readiness Tax Credit, Child Care Expense Credit Certificate, Form R-10614 from their child care facility. The facility must complete the top portion of the form including the facility’s name, license number, the Louisiana Revenue Account Number, the facility’s quality rating, and the date of the rating award. Child care providers must provide completed forms to parents or guardians for each qualifying child who attended the facility. The school readiness child care tax credit is calculated as follows: Example 1 Family’s federal adjusted gross income...................................................................$20,000 Refundable or nonrefundable tax credit..............................................................Refundable State child care credit amount...................................................................................$50 Qualified dependent under age six that attended a quality rated child care facility........................1 Quality rating of the child care facility............................................................................3* Percentage of state child care credit allowed................................................................100% School readiness child care expense tax credit ($50 x 100%)..............................................$50 The $50 school readiness child care expense credit can be claimed in addition to the $50 regular child care credit and, if the credit exceeds the taxpayer’s tax liability, the excess amount will be refunded. Example 2 Family’s federal adjusted gross income..................................................................$30,000 Refundable or nonrefundable tax credit.........................................................Nonrefundable State child care credit amount..................................................................................$50 Qualified dependents under age six that attended a quality rated child care facility.....................2 Quality rating of the child care facility for first child...........................................................4* Percentage of state child care credit allowed for first child .............................................150% School readiness child care expense tax credit for first child ($50 x 150%).............................$75 Quality rating of the child care facility for second child.......................................................3* Percentage of state child care credit allowed for second child .........................................100% School readiness child care expense tax credit for second child ($50 x 100%)........................$50 Total school readiness child care expense tax credit ($75 + $50)......................................$125 The $125 school readiness child care expense credit can be claimed in addition to the $50 regular child care credit and can be applied against the taxpayer’s liability with any excess credit carried forward for up to five years. For additional information concerning the school readiness child care expense tax credit, see the Department of Social Services’ Frequently Asked Questions. 2. Child Care Provider Tax Credit—R.S. 47:6105 Child care providers who own and operate a facility where care is given to foster children in the custody of the Department of Social Services or to children who participate in the Child Care Assistance Program administered by the Department of Social Services are eligible for the refundable School Readiness Child Care Provider tax credit. The tax credit is based on the average monthly number of children who attend the facility multiplied by the applicable credit amount based on quality rating of the child care facility. Quality Rating of Child Care Facility Tax Credit Per Eligible Child Five Star $1,500 Four Star $1,250 Three Star $1,000 Two Star $750 One Star or not participating in Quality Start 0 The Department of Social Services will provide certification by March 1 to qualifying child care providers regarding the average number of children participating in the program. The certificates must be retained in the Child Care Provider’s records and be available to the Department of Revenue on request. The credit can be taken against individual income tax, corporation income tax, or corporation franchise tax depending on the child care facility’s entity type as follows: Individual income tax credit—If the child care facility is owned by a sole proprietor, or a flow-through entity such as a Limited Liability Company (LLC), Partnership, Subchapter S corporation, the credit will be claimed on the Resident Individual Income Tax return, Form IT-540, Schedule F, or the Nonresident and Part-Year Resident Individual Income Tax Return, Form IT-540B, Schedule F-NR. Partners and shareholders should apportion the credit based on the each partner or shareholder’s percentage of ownership. Corporation income or franchise tax credits—If the child care facility is owned by a corporation, the credit will be claimed on the Corporation Income and Franchise Tax Return, Form CIFT-620, Schedule RC. Nonprofit Organizations—If the child care facility is owned by a nonprofit organization, the tax credit will be taken on the Corporation Income and Franchise Tax Return, Form CIFT-620, Schedule RC. Nonprofit organizations that are not registered with the Department of Revenue because they are exempt from tax must register with the Department of Revenue and obtain a Louisiana tax identification number to be able to claim the credit. For additional information concerning the school readiness child care provider tax credit, see the Department of Social Services’ Frequently Asked Questions. 3. School Readiness Directors and Staff Tax Credit—R.S. 47:6106 Child care directors and eligible staff are eligible for a refundable tax credit if they work at least six months for a licensed child care facility that participate in the quality rating system and are enrolled in the Louisiana Pathways Child Care Career Development System. The refundable tax credit is based on the educational level attained through Louisiana Pathways Child Care Career Development System as follows: School Readiness Tax Credit Levels Amount of Refundable School Readiness Tax Credit Director I $1,500 Director II $2,000 Director III $2,500 Director VI $3,000 Child Care Teacher I $1,500 Child Care Teacher II $2,000 Child Care Teacher III $2,500 Child Care Teacher VI $3,000 The tax credit is claimed on the Resident Individual Income Tax return, Form IT-540, Schedule F, or the Nonresident and Part-Year Resident Individual Income Tax Return, Form IT-540B, Schedule F-NR. The Louisiana Department of Social Services will provide certification to child care directors and staff indicating the educational level achieved by January 31. The Louisiana School Readiness Tax Credit, For Child Care Director and Staff, Form R-10615 must be completed by the child care provider and given to the directors and staff. The Department of Social Services will also furnish the certification information to the Department of Revenue as verification of the directors and staff’s eligibility for the tax credit. Directors and staff who file paper returns must attach a copy of the certification Form R10615 to the return when filed. If the tax return is filed electronically, the form should be retained by the taxpayer to be provided to the Department of Revenue if requested. Beginning 2009, the tax credit amounts will be adjusted annually by the percentage increase in the Consumer Price Index United States city average for all urban consumers (CPI-U), as prepared by the United States Department of Labor, Bureau of Labor Statistics, as determined by the secretary of the Department of Revenue on December first of the preceding calendar year. For additional information concerning the School Readiness Directors and Staff Tax Credit, see the Department of Social Services’ Frequently Asked Questions. For additional information concerning the Louisiana Pathways Child Care Career Development System (LA Pathways) see the Department of Social Service’s rule, LAC 67:III.5125 and 5127. 4. Tax Credit For Business-Supported Child Care—R.S. 47:6107 Businesses that support quality child care are eligible for a refundable tax credit based on the quality rating of the center. Eligible support includes: Expenses to construct, renovate, expand, or repair an eligible child care center, purchase equipment for a center, maintain or operate a center, not to exceed $50,000 in expenses per tax year; Payments made to an eligible child care facility for child care services to support employees, not to exceed $5,000 per child per tax year; and/or The purchase of child care slots at eligible child care facilities actually provided or reserved for children of employees, not to exceed $50,000 per tax year The credit is for a percentage of the eligible expenses based on the quality rating of the child care facility to which the expenses are related or the rating of the child care facility that the child attends as follows: Quality Rating of Child Care Facility Percentage of Eligible Expenses Five Star 20% Four Star 15% Three Star 10% Two Star 5% One Star or not participating in Quality Start 0% The refundable credit can be taken against individual income tax, corporation income tax, or corporation franchise tax depending on the business’s entity type as follows: Individual income tax credit—If the business providing the support is owned by a sole proprietor or a flow-through entity such as a Limited Liability Company (LLC), Partnership, Subchapter S corporation, the credit will be claimed on the Resident Individual Income Tax return, Form IT-540, Schedule F, or the Nonresident and PartYear Resident Individual Income Tax Return, Form IT-540B, Schedule F-NR. Partners and shareholders should apportion the credit based on the each partner or shareholder’s percentage of ownership. Corporation income or franchise tax credits—If the business providing the support is a corporation, the credit will be claimed on the Corporation Income and Franchise Tax Return, Form CIFT-620, Schedule RC. Nonprofit Organizations—If the child care facility is owned by a nonprofit organization, the tax credit must be taken on the Corporation Income and Franchise Tax Return, Form CIFT-620, Schedule RC. If the nonprofit organization is not registered with the Department of Revenue because it is exempt, the organization must register and obtain a Louisiana tax identification number and file the tax return to claim the credit. For additional information concerning the Tax Credit For Business-Supported Child Care, see the Department of Social Services’ Frequently Asked Questions. 5. Tax Credit For Donations To Resource And Referral Agencies—R.S. 47:6107 Businesses may also receive a tax credit for donations made to Child Care Resource and Referral Agencies. These are private agencies that contract with the Department of Social Services to provide information and services to parents and child care providers. The credit is equal to the amount donated but cannot exceed $5,000 per tax year. The refundable credit can be taken against individual income tax, corporation income tax, or corporation franchise tax depending on the business’s entity type as follows: Individual income tax credit—If the business making the donation is owned by a sole proprietor or a flow-through entity such as a Limited Liability Company (LLC), Partnership, Subchapter S corporation, the credit will be claimed on the Resident Individual Income Tax return, Form IT-540, Schedule F, or the Nonresident and PartYear Resident Individual Income Tax Return, Form IT-540B, Schedule F-NR. Partners and shareholders should apportion the credit based on the each partner or shareholder’s percentage of ownership. Corporation income or franchise tax credits—If the business making the donation is a corporation or C-corporation, the credit will be claimed on the Corporation Income and Franchise Tax Return, Form CIFT-620, Schedule RC. Nonprofit Organizations—If the child care facility is owned by a nonprofit organization, the tax credit must be taken on the Corporation Income and Franchise Tax Return, Form CIFT-620, Schedule RC. If the nonprofit organization is not registered with the Department of Revenue because it is exempt, the organization must register and obtain a Louisiana tax identification number and file the tax return to claim the credit. Is there a list of retirement system benefits that may be excluded from Louisiana income tax. Annual Retirement Income Exclusion (R.S. 47:44.1(A))—Persons 65 years or older may exclude up to $6,000 of annual retirement income from their taxable income. Taxpayers that are married filing jointly and are both age 65 or older can each exclude up to $6,000 of annual retirement income. If only one spouse has retirement income, the exclusion is limited to $6,000. Federal Retirement Benefits Exclusion (R.S. 47:44.2)—Federal retirement benefits received by federal retirees, both military and nonmilitary, may be excluded from Louisiana taxable income. State Employees, Teachers, and Other Retirement Benefits Exclusion—Individuals receiving benefits from certain retirement systems listed below are allowed to exclude those benefits from their Louisiana tax-table income. In addition, R.S. 33:7203 and R.S. 40:427.2(E) provide that Municipal and State Police Employees Retirement System deferred retirement option plan funds are exempt from state income tax. Legal Citations: R.S. 11:405 State Employees’ Retirement System R.S. 11:570 Funded Judicial Retirement Plan R.S. 11:1378 Non-contributory Judicial Retirement Plan beginning after December 30, 1980 R.S. 11:704 Teachers’ Retirement System R.S. 11:704 Teachers’ Retirement System of Orleans Parish R.S. 11:1003 Louisiana School Employees’ Retirement System R.S. 11:1331 Louisiana State Police Pension and Retirement Fund R.S. 11:1391 Pension for Confederate Veterans and Widows of Confederate Veterans R.S. 11:1403 Assessors’ Retirement Fund R.S. 11:1526 Clerks’ of Court Retirement and Relief Fund R.S. 11:1583 District Attorneys’ Retirement System R.S. 11:1735 Municipal Employees’ Retirement System of Louisiana R.S. 11:1735 City of Baton Rouge Retirement System R.S. 11:1735 Employees’ Retirement System of East Baton Rouge Parish R.S. 11:1735 Employees’ Retirement System of City of Shreveport R.S. 11:1905 Parochial Employees’ Retirement System R.S. 11:1905 Employees’ Retirement System of Jefferson Parish R.S. 11:3014 City of Alexandria Employees’ Retirement System R.S. 11:3051 City of Bogalusa Employees’ Retirement System R.S. 11:2033 Registrar of Voters Employees’ Retirement System R.S. 11:2182 Sheriffs’ Pension and Relief Fund R.S. 11:2228 Municipal Police Employees’ Retirement System R.S. 11:2228 Policemen’s Pension and Relief Fund of the City of Shreveport R.S. 11:2263 Firefighters’ Retirement System R.S. 11:3140 Firefighters’ Pension and Relief Fund for the Consolidated Fire Districts Bastrop R.S. 11:3161 Firefighters’ Pension and Relief Fund for Baton Rouge R.S. 11:3171 Firefighters’ Pension and Relief Fund for Bogalusa R.S. 11:3205 Bossier City Firemen’s Pension and Relief Fund R.S. 11:3294 Lafayette (City of) Firemen’s Pension and Relief Fund R.S. 11:3345 Monroe Firemen’s Pension and Relief Fund R.S. 11:3389 Firefighters’ Pension and Relief Fund of New Orleans R.S. 11:3513 City of Monroe Police Pension and Relief Fund R.S. 11:3566 Policemen’s Pension and Relief Fund for Alexandria R.S. 11:3568 Bossier City Policemen’s Pension and Relief Fund R.S. 11:3608 Lafayette (City of) Policemen’s Pension and Relief Fund R.S. 11:3658 Policemen’s Pension and Relief Fund for the Department of the City of New Orleans R.S. 11:3691 Harbor Police Retirement System (Port of New Orleans) R.S. 11:3770 Bus Drivers’ Pension and Relief Fund of the City of Monroe R.S. 11:3800 Electrical Workers’ Pension and Relief Fund of the City of Monroe R.S. 11:3823 Employees’ Retirement System of the Sewage and Water Board of the City of New Orleans R.S. 11:3823 New Orleans (City of) Employees’ Retirement System R.S. 17:1613 Louisiana State University Retirement System R.S. 47:44.2 Railroad Retirement System Benefits R.S. 47:44.2 Social Security Retirement Benefits R.S. 47:52 Disability Pay to World War II Veterans U.S.C.A. 45:231m Railroad Retirement Supplemental