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Tax relief in the economic downturn

The downturn economy has hit the US hard. The financial frailty, marked by job losses and ever increasing debt figures, is indeed a crisis to be reckoned with. Considering the current situation, the Federal government has designed several tax relief programs to keep American families from falling further into debt.

Is your family experiencing severe financial hardships? Then taking advantage of these tax relief programs would not only lower your tax load, but also spare you the additional hassle of finding a suitable option for American tax debt relief. But the best part is that the tax relief programs might boost your incomes as well. While you may find the complications of the tax code difficult to grasp, understanding the basic provisions can make it easier for you to get some tax relief.

The primary tax relief offered by the federal government is through the standard deductions on your gross taxable income. Usually the deductions allow tax breaks for different filing statuses. If you can get your standard deductions maximized according to your household income and family size, then you can save a lot of money on your taxes.

Many parents let their wage-earning children file their own tax returns, as independents. This is a common mistake. Filing with independent status means your child is not dependent on you. And, thus the IRS will prevent you from claiming that your child is dependent on you and it will reduce the standard deduction on your income.

Also, be sure to adjust your withholding exemptions throughout the year. The more exemptions you claim, the less money the government will withhold from your checking account and you can expect a greater refund. According to the new tax relief program, the calculation of the withholding will be changed too, so your returns are maximized.

The new tax relief is beneficial to homebuyers too. In the economic upheaval, owing taxes on homes could cost you very dearly. Keeping that fact in mind, the federal government has provided important tax benefits to homebuyers. They can deduct the mortgage expenses and loan origination fees from their taxable income. But, these deductions can be used only for building or buying primary residences.

The new tax relief has extended the tax credit to $8,000, for the first time home buyers. This is extremely helpful as it directly lowers your tax amount, instead of adjusting your gross income.

Several tax breaks are available for parents of dependent students as well. Normally, any money you spend on the tuition for secondary education of your children is tax deductible. Previously, this was available only for the first two years of your child's secondary education. However, the recent tax relief program has extended it to four years.

Overall, tax relief is meant to benefit American families in every respect. A detailed evaluation of all your options can be quite beneficial and help you take care of your loved ones, especially in times of such economic difficulty.

(November 11, 2010)