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Tax & Bookkeeping

Three Things Maryland Teachers Should Know when Preparing their Taxes

3 things Maryland Teachers Should KnowThe first one is for Maryland teachers, the other two apply to all U.S. teachers.

  1. Maryland Quality Teacher State Tax Credit – is for Maryland taxpayers who work in public schools in the state of Maryland that paid for graduate level courses in order to maintain their professional certification. The credit can be used to reduce their Maryland state income tax up to $1,500 for each qualifying spouse.
  2. Lifetime Learning Credit – All American taxpayers regardless of profession can use the lifetime learning credit to reduce their tax bill, if they paid college tuition. If you are taking the Maryland state teacher’s tax credit you will also qualify for the Lifetime Learning Credit because you will have paid college tuition. Your household may qualify for the American opportunity credit if you have someone that is in the first four years of their college education. This credit can be more advantageous depending on how much tuition was paid. Regardless of which credit you use in order to take either credit you will need to file a form 1098-T which would have been mailed to you or made available online by January 31, from the university or universities where the tuition was paid.
  3. Educator Expenses – All American teachers, teacher’s aides, principals and counselors can reduce their taxable income by up to $250 for expenses paid out of pocket for classroom activities or supplies. If both spouses are teachers they may each deduct $250 for a total of up to $500.

Additional advice for rental property owners

If you own a rental property, make sure you depreciate the purchase price of your property minus the value of the land using the real estate tax assessment for the property to determine the ratio of land to property. Then list by year all the purchases and improvements that you made for your property since you bought the property. This list should include everything that would be capable of being used for at least 3 years, including flooring, furniture, carpets, water heaters, siding, bathroom tile and windows to give you some examples. List each item separately. You may depreciate the assets at different speeds depending on service life.

Depreciation is a cashless expense that lowers your tax bill and increases your refund substantially. This is a different kind of expense from paying for repairs or supplies which you can deduct separately. These purchases or additions increase the value or service life of the property and when depreciated over time can also reduce your taxes significantly.

References:

http://www.irs.gov/publications/p527/ch03.html

http://www.irs.gov/taxtopics/tc458.html

http://www.irs.gov/publications/p970/ch03.html

http://taxes.marylandtaxes.com/Individual_Taxes/Individual_Tax_Types/Income_Tax/Filing_Information/Determine_Tax_Credits_and_Deductions/Quality_Teacher_Incentive_Credit.shtml

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About The Web Accountant

Justin is a seasoned accountant with over 10 years experience in business and accounting including public accounting, corporate accounting, government contracting, real estate, retail, individual and business tax preparation. Justin has a bachelor of science degree in finance with a concentration in advanced accounting from the University of Maryland. Justin is an IRS Registered Tax Professional and works via the web with clients anywhere in the world and is available in person to clients in the Maryland, Washington D.C. and Virginia area.

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