House Stand Off on Tax Debt Deductions and Government Deficit Management

The stand off between the Republicans and Democrats on how to handle the issue of the raising government deficit continues to rock Congress. In a recent proposal by President Obama, the Democrats seem determined to have a lot of the tax deductions claimed by Americans today reduced and especially for the wealthiest 2%. The so-called “Tax Expenditure”, which is a term that has been in use over the years by tax “specialist,” is seemingly being adopted as the main area of contention. Tax Expenditure includes the deductions such as mortgage claims, charitable contributions, education, deductions by employers on Health Insurance, and lowered capital gain taxes.

Republicans say that they are not willing to discuss any form of tax hikes including a hit on tax expenditure as this translates to households paying more in taxes. According to a Republican proposal forwarded to the House by Paul Ryan, Chairman of the House Budget Committee, the Republicans suggested a cut on the Healthcare expenditure as an alternative to increasing the tax burden for American Households; the Healthcare that was pushed into being by the President Obama late last year. President Obama dismissed these proposals and said that Republicans were not keen at reducing the deficit, but are interested in changing the U.S. social compact.

On the other hand, the Democrats, championed by the president himself, are out to have a reduction in the tax debt deductions. They are keen at reducing the Bush tax cuts for individuals and households with an income over $250,000 a year by the end of 2012. In fact, Obama insists that he was dedicated to have the tax deductions for the “rich” reduced by 2011 but compromised his stand owing to a deal with Democrats in December 2010 to have these reductions pushed to 2012.

In his argument, Obama insists that people like Warren Buffet do not need any tax debt deductions. In fact, tax deductions such as a reduction on capital gain tax effectively resulted in Warren Buffet paying a lower tax rate than his secretary! Besides the current tax restructuring geared at offsetting the current deficit, President Obama is still eager to having an overall tax reform that would have long term impact on the tax structure of the United States. In these tax reforms, a broad reduction on the tax exemption and reduction is suggested that would then be absorbed by an overall reduction on tax rates.

Besides the issue of the Tax Expenditure, another looming issue that has draws equal attention from both sides of The House is Social Security. Both sides agree that something needs to be done urgently to manage the expected rise in the Social Security deficit as the “baby boomers” get to retirement age. The Republicans are calling on Obama to act fast while Obama is seeking to have a bipartisan team to look into the issue separately from the current deficit issue at hand. Some of the suggestions given on managing the expected Social Security deficit is by raising the age of retirement, increasing Social Security Tax, and reducing Social Security benefits for the wealthy.

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Six Types of Deductible Continuing Education

In this article we would like to talk about continuing your education as a business professional. There are many things you can do to learn more about your trade, and many of them are also tax deductible, so they can save you money in the long run. So let’s talk about six types of continuing education that are deductible on your taxes.

1. College classes. Taking college classes to improve or maintain your business is tax deductible for your business. The cost of tuition, books, class fees, materials and supplies, and the gas or mileage to get there are all deductible.

2. Seminars. Throughout the year there are many seminars put on by many different organizations on many topics. Most of them charge a fee to attend. Some give credit if your type of professional license requires it and some do not. But regardless of whether credit is given or not, if it is a seminar about something that can help you as a business owner, it is considered continuing education. The fees to attend and travel expenses are all deductible.

3. Trade shows. A trade show is a show that has vendors with products and services that can help your business. The most common trade shows are in the construction industry, but there are many other types of trades and businesses that have them. Attending these shows helps you to keep updated on current products that can be helpful to your business. Again the entrance fees and travel expenses are deductible.

4. Vendor sponsored events. Businesses you work with or purchase product from sometimes sponsor events. Sometimes they are to promote their product or service and sometimes they are just helpful events to get you to like them. Either way the goal of the event is to teach you something. These events are often fun as well as informative, but they are still considered continuing education and the same things are deductible.

5. Conferences. As accountants, we attend a conference sponsored by the IRS every year in order to obtain credits to keep our license current. This conference is never closer than 600 miles away. They have them all over the country, so we always choose the one that is the most convenient for us. There are many types of conferences for many types of businesses. Conferences generally have classes you can attend about various subjects pertinent to your profession. They also often have a banquet and networking sessions to help you connect with others. Sometimes there are even sightseeing excursions you can take advantage of. Conferences can be both informative as well as fun and definitely fall into the continuing education category. Many people take their families with them and do fun things in the evenings or in between conference sessions.

6. Educational events you sponsor for your employees. It is important to keep your employees educated and informed as well as keeping moral up. Many companies hold events for their employees for those purposes. Some have a weekend retreat and some go on a cruise. The most important thing about this is to have some sort of training experience while at the event. Anything the company pays for such as transportation, food, lodging, or educational materials is tax deductible for the business. Anything the employee pays for is deductible to the employee.

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Tax Rebates Simplified – Get Money Back From New & Renewed Tax Deductions This Year

Itemized Deductions remain virtually unchanged such as mortgage interest, state & local taxes, medical costs etc. Standard Deductions however have increased with their allowable deduction amounts. Listed below are the Standard & Increased amounts for 2008:

o Standard deduction is $10,900 for couples filing jointly; $5,450 for single taxpayers.

o Standard increased deduction for real-estate property tax is capped at $1,000 for married; $500 for single taxpayers.

o Standard deduction addition for taxpayers who are at least age 65 or blind; $1,050 for each married individual; $1,350 for singles.

[These deduction advantages are ideal for the taxpayer(s) which live mortgage free in a no-income tax state. The advantage here is being able to deduct a total of $14,000 for married/ joint filers both aged 65 or older and had paid at least $1,000 in property tax ($10,900 + $1,000 + $2,100 = $14,000). For the single filer the tax deduction advantage is $7,300 ($5,450 + $500 + $1,350 = $7,300).]

o First-time Homebuyers (if purchased after April 8, 2008; or if you purchase before June 30, 2009 credit may be claimed for 2008 amended return-if already filed) full tax credit of $7,500 for most taxpayers whether married or single filing jointly with an income up to $150,000 & partial tax credit allowed up to $170,000. Full tax credit for singles given for incomes up to $75,000 & partial for up to $95,000.

[The Catch: This credit is essentially an interest free loan and must be repaid over 15 years. If the full tax credit is claimed, $500 will be owed each subsequent year for 15 years beginning in 2010. If the house is sold before full repayment, the balance, limited to the gain on the sale, will be due on your tax return for the year of the sale.]

o Renewed deduction “educator deduction”, qualified teachers may deduct up to $250 out-of-pocket expenses.

o Renewed deduction option of state & local sales taxes instead of state & local income taxes.

[Refer to the IRS table Form 1040 listing deductions, based on household size, income & state of residency, an allowable number will be provided. However, if you are analytically organized enough to have kept all of your 2008 purchase receipts, you can deduct the amount you paid in sales tax. In addition, sales tax paid on various large purchases such as a car, boat, home-building materials may be deducted as well.]

o Renewed deduction of tuition & fees paid for in 2008 has been extended for any college or post-graduate education expense.

[Qualified higher-education costs for married couples filing jointly with incomes up to $130,000 may deduct up to $4,000. Incomes of $130,000 - $160,000 may deduct up to $2,000 only. Single taxpayers & heads of household with an income of up to $65,000 may deduct up to $4,000. Incomes of $65,000 - $80,000 may deduct up to $2,000 only. Deductions may not be applied to a Hope Scholarship or Lifetime Learning students expenses for which a tax credit for 2008 is currently being claimed.]

This of course is only a summary of the vast number of standard, itemized, credit, & renewed deductions being allowed this tax season. My goal is to make individuals aware of existing opportunities in order to help them preserve their hard-earned income and to Inspire Financial Wealth. Please share this valuable information with whomever you feel would benefit by and then you too will Inspire Financial Wealth in another, as it shall then return right back to you.

The author of this article is Abel, a researcher, analyst, learner and educator. Driven to succeed financially and spiritually in order to contribute to his fellow man, Abel studies under the teachings of such distinguished authors as Robert T. Kiyosaki, Sharon L. Lechter, Dan Millman, Steve Forbes, Donald J. Trump, George H. Ross, Thomas J. Stanley, Warren Buffett, and George Soros among many, many more. Abel enjoys his meaningful days as a stay-at-home father, handy-man, husband, friend to all that he has the privilege to encounter and tinkering with his motorized “toys”. His professional experience includes Real Estate Investments/Developments, Bank Negotiations, Home-Based Entrepreneur, Business Owner, Firefighter/Paramedic San Diego County and before fatherhood, community volunteer. You can find Abel and his latest venture at [http://www.inspirefinancialwealth.com/] If you are of the mindset to achieve financial success and then to share what you have learned with others, please visit and learn more. All questions answered, related to subject or not.

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