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Caring for an elderly relative can be rewarding, but incredibly difficult – as well as expensive. However, it may be possible to recoup some of the costs through income tax savings.

There are two general approaches to tax savings on elder care costs – taking medical deductions that can be itemized and claiming a dependent care credit that can be subtracted directly from the taxes you owe.

First, you must determine if your elderly relative qualifies as a dependent. Full details are listed in IRS Publication 501, "Dependents, Standard Deduction, and Filing Information," but the primary criteria are that they must be a relative, you must be providing over half of their support, and their gross 2020 income must be less than $4,300.

The definition of relatives includes stepparents and in-laws. They do not...

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When you use your car for both personal and business reasons and you are not fully reimbursed through your employer for the business expenses, you can deduct those costs from your taxes. How do you go about claiming these deductions? Assuming that you itemize, you have two general paths:

  • Standard Mileage Method – The IRS prints flat rates of reimbursement per mile driven for each calendar year. For business use of your vehicle in tax year 2020, the standard mileage rate is 57.5 cents per mile, down from the 2019 value of 58 cents per mile.
  • Actual Expense Method – Rather than calculate an average based on miles, you can calculate the actual expenses related to the non-personal use including gas, oil, maintenance costs, depreciation, tolls, parking fees, insurance, and other applicable exp...

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