Q&A: dependent child care
Child care payments require working spouse; car purchase is not deductible
NEW YORK (CNNfn) - Are you eligible for dependent child care credit if your spouse isn't currently employed? Can the purchase of your new car be tax deductible? And what is the amount of income needed to file a tax return?|
Got questions about filing your return? Here's your chance for some free advice. CNNfn has organized a panel of outside experts to answer your questions throughout the filing season. Send your questions to: taxQuestions@cnnfn.com Not all questions can be answered and any information you provide may be used by one or more AOL Time Warner properties. This week's answers are provided by Frank Degen, an enrolled agent with the National Association of Enrolled Agents. The NAEA can be reached toll-free at 800-424-4339.
Question: I have a kid of 5-1/2 years old and he started going to kindergarten in August of 2000. I paid $1,587 for him for the 2000 year. He goes to school in the morning at 8:00 a.m. and we pick him up at 3:00 p.m. My wife doesn't work. She is a house wife. My question is, should I use the amount for child care payments or not? Please help.
Answer: Since your wife does not work, you cannot claim the dependent care credit. Generally, both spouses must work at least part-time to qualify, unless one of the spouses is a full-time student or is incapable of self-care. Spouses who are in either of the above categories are deemed to have earned income of $200 per month for one child and $400 per month for 2 or more children.
Question: I purchased a car, and can I deduct the tax paid on the car?
Answer: Sales tax paid on the purchase of a personal car is not deductible. Personal property taxes (which are charged in some states) can generally be deducted as a deduction on Schedule A provided the tax is based ONLY on the value of the car.
Question: Thank you for your tax information on your Web site; it is very informative. I have a question regarding the capital gains tax in regards to the sale of stock. I sold stock this year (for the first time), and I have had it for about 15 years. How do I find out the original stock value (purchase price), and how does the IRS know this figure?
Answer: The cost of your stock would be on your confirmation slip from the purchase. You should always keep these "buy" slips to match with the "sells" in order to correctly determine your gain. If you have lost the purchase order, there are Web sites that can give you historical quotes on the value of many stocks.
Question: Please tell me who does not have to file a tax form. In other words, what does your income have to be before you must file?
Answer: The amount of income that is required to file a tax return depends on your filing status and your age. There are some exceptions, but for most people the requirements are:
- Single: $7,200 ($8,300 if 65 or older)
- Married filing jointly: $12,950 ($13,800 if one spouse is 65 or older; $14,650 if both spouses are 65 or older.)
- Married filing separately: $2,800 (any age)
- Head of household: $9,250 ($10,350 if 65 or older)
Question: Me and my wife will be filing a joint return. Since we both work do I check off line 6a and get a $2,800 deduction? I can't seem to find help in the 1040 instruction booklet; they skip right to 6b and I know that since my wife works I don't check it.
- Qualifying widow(er) with dependent child: $10,150 ($11,000 if 65 or older)
Answer: You would check BOTH box 6(a) and 6(b) (except in the rare case a parent or someone else can claim either of you as a dependent.) Married couples filing jointly each get a $2,800 personal exemption. In addition to the exemptions, married couples will take the larger of either a standard deduction ($7,350 unless one or both spouses are 65 or older) or itemized deductions from Schedule A.