If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return. This exclusion is allowed each time that you sell your main home, but generally no more frequently than once every two years.
To qualify for this exclusion of gain, you must meet ownership and use tests.
Ownership Test: During the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years.
Use Test: During the 5-year period ending on the date of the sale, you must have lived in the home as your main home at least 2 years. If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. But both of you would have to meet the use test to claim the $500,000 maximum amount.
If you do not meet the ownership and use tests, you may be allowed to exclude a reduced maximum amount of the gain realized on the sale of your home if you sold your home due to health, a change in place of employment, or certain unforeseen circumstances. Unforeseen circumstances include, for example, divorce or legal separation, natural or man-made disasters resulting in a casualty to your home, or an involuntary conversion of your home.
If you can exclude all the gain from the sale of your home, you do not report the gain on your federal tax return. If you cannot exclude all the gain from the sale of your home, use Schedule D, Capital Gains and Losses, of the Form 1040 to report it.
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With the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $1,000 for each qualifying child under the age of 17.
A qualifying child for this credit is someone who meets the following criteria:
Age is under age 17 at the end of 2007
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Relationship is your son, daughter, adopted child, stepchild or eligible foster child, sibling, or stepsibling or a descendant of any of these individuals
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Citizenship is a U.S. citizen or resident alien
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Support did not provide over half of his or her support and did live with you for more than half of 2007 (note that some exceptions to this criteria exist)
The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status:
| Married Filing Jointly |
$110,000 |
| Married Filing Separately |
$55,000 |
| All others |
$75,000 |
In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim some or all of the difference as an “additional” Child Tax Credit. The additional Child Tax Credit may give you a refund even if you do not owe any tax.
For 2007, the total amount of the Child Tax Credit and any additional Child Tax Credit cannot exceed the maximum of $1,000 for each qualifying child.
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The failure to file a federal tax return can be costly — whether you end up owing more or missing out on a refund.
There are several reasons taxpayers don’t file their taxes. Perhaps you didn’t know you were required to file. Maybe, you just kept putting it off and simply forgot. Whatever the reason, it’s best to file your return as soon as possible. If you need help, even with a late return, the IRS is ready to assist you.
Here are some things to consider:
Failure to File Penalty. If you owe taxes, a delay in filing may result in a "failure to file" penalty, also known as the “late filing” penalty, and interest charges. The longer you delay, the larger these charges grow.
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Losing Your Refund. There is no penalty for failure to file if you are due a refund. However, you cannot obtain a refund without filing a tax return. If you wait too long to file, you may risk losing the refund altogether. The deadline for claiming refunds is three years after the return due date.
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EITC. Individuals who are entitled to the Earned Income Tax Credit must file their return to claim the credit even if they are not otherwise required to file.
Whether or not you must file a tax return will depend upon a number of factors, including your filing status, age, and gross income.
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JSReisman@TaxHelp1040.com
