“Students are exempt” from filing taxes, right? Wrong. That is a common myth and a trap that many people fall into. Students, regardless of whether they are in college or high school full or part time, do need to file taxes if they have earned income. The student will need to file a tax return and report all of the income they’ve earned during the course of the year. Also, when it comes to students’ filing taxes, keep in mind that even if they file their own return you can still claim them as a dependent on your tax return. The myth that you cannot claim your student if he or she files his or her own return is just that, a myth. As long as you provided more than 50% of that students support, you are still allowed to claim them on your taxes as a dependent.
Don’t fall into the myth that if you’re 55-years-old or older that you can sell your primary residence and reap the rewards of the sale tax free. Many years ago, this was the case, but not any more. Many years ago, the 55-year-old home seller was able to exclude up to $125,000 in profits realized as a one-time deduction on a home sale. The home had to be your primary residence to qualify. The age exemption no longer factors into being allowed this exemption.
Another myth that many individuals fall into is the “I’m married I have to file married filing jointly” status. While in many cases it is more advantageous to file this way, there are instances in which using a married filing separately status could be to your benefit. One of the times when the married filing separately status could work to your benefit is if you and your spouse have disparate incomes and one of you has a high amount of medical expenses and deductions. Because of the limits imposed on the limit of medical deduction expenses compared to income, filing jointly could limit access to these deductions. Trying to meet the threshold for medical deductions with a high income are difficult to meet.
If you’ve ever owned a home, you can’t qualify for the first time home buyer credit, right? Myth again. Until September 2010, the federal government offered a first-time home buyer credit of up to $8,000 to first time home buyers. The way you qualified for this credit was by having had no ownership interest in a principal residence for three years prior to closing on a newly purchased home. Another way to qualify for a first time home buyer credit was to have owned and lived in a home as your primary residence for five years. When you purchased a new home you could have been eligible to apply for a credit of up to $6,500.
Because filing taxes is such a complicated undertaking, you certainly don’t want to fall prey to myths for filing taxes. Keep in mind that when you’re looking to prepare taxes it’s best to look to a professional tax preparer for your tax resolution issues.
Experiencing tax problems with the IRS? Contact Guardian Tax Resolutions. The Guardian will help you resolve your tax issues with the IRS.