The Salina Journal from Salina, Kansas on January 16, 1986 · Page 29
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The Salina Journal from Salina, Kansas · Page 29

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Salina, Kansas
Issue Date:
Thursday, January 16, 1986
Page:
Page 29
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The Salina Journal Thursday, January 16,1986 Page TO Item Child care payments aid working parents Miiii<ulfn>mI>o<>oTII\ JL ** ^*J ^ (Continued from Page T8) If you buy such things as clothing, a radio or TV set, furniture, or household appliances on an installment plan, budget charge account or credit card that lists a finance charge, you may treat the finance charge payment as interest. In general, interest deductions must meet the following tests: the interest must result from an actual debtor-creditor relationship; the interest must be based on a valid obligation to pay a sum of money; and, the debt must be one for which you are legally liable. • Taxes — The following state or local taxes you paid during the year are deductible: state or local income tax (including tax withheld or paid as estimated tax during the year), real property tax, personal property tax, general sales tax and contributions to certain state disability benefit funds. The 1985 Optional State Sales Tax Tables are a convenient reference for determining the amount you may be able to deduct for sales taxes. Remember, the sales tax on certain major purchases such as a car, motorcycle, motor home, truck, boat, plane, home (including mobile or prefabricated), materials purchased to build a new home can be deducted in addition to the sales tax table amount. Personal property taxes assessed by some states, especially on cars, may be deductible if they are based only on the value of the personal property and are imposed annually. Generally, no federal taxes are deductible on your federal income tax return. • Miscellaneous deductions — These deductions include such items as union dues; the cost of safety equipment, tools, and supplies used in your job including professional and trade journals; and, expenses incurred in seeking new employment in the same trade or business. Job hunting expenses are not deductible if you're seeking employment in a new field of work. You can also deduct the rent on your safety deposit box if you keep income-producing items in it, such as stocks and bonds. Taxpayers who hire someone to prepare their tax returns can deduct the fee paid tothepreparer. If you legally adopt a child with special needs, you may be able to deduct up to $1,500 of qualified adoption expenses as a mis cel- laneous deduction. A child with special needs is one who the state determines is described in the Social Security Act adoption assistance program. This is a child who the state determines cannot or . should not be returned to his or her ] parental home, who has a specific factor or condition that makes the child difficult to place, and who has been the subject of an unsuccessful placementeffort. 1 '''.'. Parents who pay someone to care for a child or disabled dependent while they work or look for work may qualify for a special tax credit, according to the Internal Revenue Service said. The Child and Disabled Dependent Care Credit may be taken not only for payments to babysitters and day-care centers but also to certain relatives paid for this service. This credit is available to married couples who both work part- time or full-time and file jointly. If one spouse works full-tune and the other works part-time, is a full- tune student or is disabled, they are also eligible for the credit, according to the IRS. The credit may also apply to a divorced or separated parent who has custody of a child who is under 15 or physically or mentally incapable of self-care, even though the parent may not be entitled to a dependency exemption for the child. The parent claiming the credit must, however, have custody for a longer period during the year than the other parent. A married person living apart from his or her spouse is eligible for the credit when the spouse is absent for the last six months of the taxable year, and a separate return is filed. The credit is from 20 to 30 percent of eligible expenses, depending on the taxpayer's adjusted gross income. The maximum credit that may be taken is limited to $720 for one qualifying person and to $1,440 for two or more qualifying persons. To qualify for the Child and Disabled Dependent Care Credit, the IRS said, a taxpayer (1) must have been gainfully employed or in active search of gainful employment when the expense for the child's or disabled dependent's care was incurred, and (2) must have paid over half the cost of maintaining his or her household, which included one or more qualifying individuals. A qualifying individual is a dependent child under 15 years of age or a spouse Accurate records key to business deductions Knowing the proper reporting and recordkeeping requirements is essential for those taxpayers who claim business-related travel, transportation, entertainment and gift expenses. The primary proof for these business expenses starts with keeping timely entries of what was spent in a log, diary, journal, appointment book, or similar record. These entries must also include the date and location of the business travel or entertainment, along with who was seen, and the business purpose for incurring the expense, according to the Internal Revenue Service. A receipt or similar supporting evidence is required for all expenses of $25 or more. According to IRS guidelines, all business expenses must be ordinary and necessary in the tax- payer's line of work to be deductible. Reasonable local transportation expenses such as the cost of driving and maintaining an automobile while on business, excluding any commuting and personal mileage, can be deducted. For a business-related trip outside the area of his or her main place of business, a taxpayer may deduct expenses such as food and lodging. Allowable entertainment deductions must either be directly related to, or associated with, the active pursuit of the taxpayer's business. Business gifts that the taxpayer may deduct are generally limited to $25 for any one individual for the year. The burden of proof for all business expenses lies with the taxpayer, who must show that a bonafide business purpose exists. Married couples who work are eligible for a special deduction of as much as $3,000 on 1985 federal tax returns. This deduction may be claimed on either Form 1040A or Form 1040 as a subtraction from gross income, the IRS said. The deduction is limited to 10 percent of the qualified earned income of the lesser-earning spouse. However, the maximum Get The FACTS About... I Can Tailor Your IRA To Fit Your Needs Marilyn J. Ahlstrom, CFP Services 227N.SantaFe Suite 302E 827-6473 or dependent who is mentally or physically incapable of self-care. To claim the credit, taxpayers can file Form 1040A, using the worksheet in the Form 1040A tax package to compute the amount of the credit. Taxpayers who file Form 1040 may also claim the credit, even if they do not itemize deductions. These taxpayers compute the credit on Form 2441, "Credit for Child and Dependent Care Expenses," and attach this form to the Form 1040. Working couples to get break amount allowed is 10 percent of up to $30,000 for a deduction of $3,000. To take the deduction, both spouses must have earned income, such as wages, salaries, and tips. 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