Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses Crowdfunding, Social Security Changes and Year-end Tax Planning On ESPN Radio – November 6, 2015 Show

Topics Covered:

1. SEC Adopts Rules to Permit Crowdfunding
2. Big changes that are coming for how you claim social security benefits.
3. Top 2015 year-end tax planning tips you need to be aware of.
4. Questions from our listeners:

• I am interested in investing in a particular company that has corporate bonds, preferred stock and common stock. What are the differences between each of those types of securities?
• My university requires each incoming freshman to come to school with their own computer. Is there any way to deduct the cost of the computer from my tax liability?

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Jeff states: Yes sometimes we just have to take the money and run!

Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.
This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.
Windus states:
And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.
Jeff states:
When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Windus states: And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Jeff states: Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.
Jeff states:

For today’s show we have coming up:

Segment 2 material: Big changes that are coming for how you claim social security benefits.

Windus states:

Also coming up is:

Segment 3 material: We have some top 2015 year-end tax planning tips you need to be aware of.

And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Windus.

SEC Adopts Rules to Permit Crowdfunding

Amendments to Existing Rules to Facilitate Intrastate and Regional Securities Offerings Put Out By The SEC. http://www.sec.gov/news/pressrelease/2015-249.html

Jeff states: The Securities and Exchange Commission on October 30, 2015 adopted final rules to permit companies to offer and sell securities through crowdfunding.  The Commission also voted to propose amendments to existing Securities Act rules to facilitate intrastate and regional securities offerings.  The new rules and proposed amendments are designed to assist smaller companies with capital formation and provide investors with additional protections.

Windus states: Crowdfunding is an evolving method of raising capital that has been used to raise funds through the Internet for a variety of projects.  Title III of the JOBS Act created a federal exemption under the securities laws so that this type of funding method can be used to offer and sell securities.  And since then SEC Chair Mary Jo White has stated there is a great deal of enthusiasm in the marketplace for crowdfunding, and she believes these rules and proposed amendments provide smaller companies with innovative ways to raise capital and give investors the protections they need. She further states that with these rules, the SEC has completed all of the major rulemaking mandated under the JOBS Act.

Jeff states: So since these rules were made under a delegation of authority by Congress, it should be apparent that they are here to stay and therefore this is something that we should take advantage of.

Windus replies. That’s right. The final rules, Regulation Crowdfunding, permit individuals to invest in securities-based crowdfunding transactions subject to certain investment limits.  The rules also limit the amount of money an issuer can raise using the crowdfunding exemption, impose disclosure requirements on issuers for certain information about their business and securities offering, and create a regulatory framework for the broker-dealers and funding portals that facilitate the crowdfunding transactions. 

Jeff asks Windus: What are some of the highlights of the recommended final rules?

Windus replies: The recommended rules would, among other things, enable individuals to purchase securities in crowdfunding offerings subject to certain limits, require companies to disclose certain information about their business and securities offering, and create a regulatory framework for the intermediaries facilitating crowdfunding transactions.  

Windus continues: More specifically, the recommended rules would: 

• Permit a company to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period;

• Permit individual investors, over a 12-month period, to invest in the aggregate across all crowdfunding offerings up to:
  • If either their annual income or net worth is less than $100,000, than the greater of:
    • $2,000 or
    • 5 percent of the lesser of their annual income or net worth.
  • If both their annual income and net worth are equal to or more than $100,000, 10 percent of the lesser of their annual income or net worth; and 
• During the 12-month period, the aggregate amount of securities sold to an investor through all crowdfunding offerings may not exceed $100,000.

Jeff asks Windus: Do these rules do anything to with regards to what a company must disclose when seeking crowdfunding?

Windus replies: Companies that rely on the recommended rules to conduct a crowdfunding offering must file certain information with the Commission and provide this information to investors and the intermediary facilitating the offering, including among other things, to disclose: 

• The price to the public of the securities or the method for determining the price, the target offering amount, the deadline to reach the target offering amount, and whether the company will accept investments in excess of the target offering amount;

• A discussion of the company’s financial condition;
• Financial statements of the company that, depending on the amount offered and sold during a 12-month period, are accompanied by information from the company’s tax returns, reviewed by an independent public accountant, or audited by an independent auditor.  A company offering more than $500,000 but not more than $1 million of securities relying on these rules for the first time would be permitted to provide reviewed rather than audited financial statements, unless financial statements of the company are available that have been audited by an independent auditor;

• A description of the business and the use of proceeds from the offering;
• Information about officers and directors as well as owners of 20% or more of the company; and
• Certain related-party transactions.

In addition, companies relying on the crowdfunding exemption would be required to file an annual report with the Commission and provide it to investors.

Jeff asks Windus: Did the rules establish a marketplace where crowdfunding would occur?

Windus replies: Yes. A funding portal would be required to register with the Commission on new Forum Funding Portal, and become a member of a national securities association (currently, FINRA).  A company relying on the rules would be required to conduct its offering exclusively through one intermediary platform at a time. 

Windus continues [Time permitting]: The recommended rules would require intermediaries to, among other things:

• Provide investors with educational materials that explain, among other things, the process for investing on the platform, the types of securities being offered and information a company must provide to investors, resale restrictions, and investment limits;
• Take certain measures to reduce the risk of fraud, including having a reasonable basis for believing that a company complies with Regulation Crowdfunding and that the company has established means to keep accurate records of securities holders;
• Make information that a company is required to disclose available to the public on its platform throughout the offering period and for a minimum of 21 days before any security may be sold in the offering;
• Provide communication channels to permit discussions about offerings on the platform;
• Provide disclosure to investors about the compensation the intermediary receives;
• Accept an investment commitment from an investor only after that investor has opened an account;
• Have a reasonable basis for believing an investor complies with the investment limitations;
• Provide investors notices once they have made investment commitments and confirmations at or before completion of a transaction;
• Comply with maintenance and transmission of funds requirements; and
• Comply with completion, cancellation and reconfirmation of offerings requirements.

Jeff asks: When do these new rules come into effect?

Windus replies: The new crowdfunding rules and forms will be effective 180 days after they are published in the Federal Register. The forms enabling funding portals to register with the Commission will be effective January 29, 2016. 

Jeff states: So with the 2015 tax year coming to a close, this is another thing we should keep in mind. Well it’s time for a break but stay tuned because we are going to tell you about the big changes that are coming for how you claim social security benefits.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Big Changes Are Coming For How You Claim Social Security Benefits!

Jeff states: Windus you have spent ages telling clients how to elect social security in order to maximize their benefits and now all of this is likely going to change.

Windus states: That’s right. It looks like new rules will be coming into effect. https://www.kitces.com/blog/congress-ends-file-and-suspend-restricted-application-and-other-voluntary-suspension-social-security-strategies/

Windus continues: Which makes even more sense that you should take advantage of my offer … PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Jeff asks Windus: So please go on and tell our listeners what happened.

Windus replies:

File and Suspend Method of Claiming Social Security Benefits to Be Eliminated:  The Bipartisan Budget Act of 2015 (H.R. 1314—the Act), signed by President Obama on November 2, 2015, eliminates the file and suspend method, a popular strategy used by married couples to maximize their lifetime Social Security benefits. Under this approach, a higher earning spouse claims benefits at his full retirement age (currently age 66) but suspends the benefits until a later date (e.g., at age 70 or sooner, if desired), allowing the Social Security credits to continue to grow. The lower earning spouse claims benefits based on the higher earning spouse’s earning record, which are more than the benefits based on his or her own earnings record. In a provision labeled “closure of unintended loopholes,” the Act effectively eliminates this opportunity for claims filed after April 30, 2016 (180 days after enactment). Now for those who’ve been using this method or other eligible individuals who file to claim benefits under this method within the next 180 days, you will not be affected. [Bipartisan Budget Act of 2015, Section 831(b)]

Restricted Application Method of Claiming Social Security Benefits to Be Eliminated:  The Bipartisan Budget Act of 2015 (the Act) also eliminates the restricted application method (sometimes called the claim some now, claim more later method) for claiming Social Security benefits by married couples. Under this strategy, a spouse reaching full retirement age who is eligible for both a spousal benefit (based on his or her spouse’s earnings) and a retirement benefit (based on his or her own earnings) could file a restricted application for spousal benefits only, then delay applying for retirement benefits based on his or her own earnings record (up until age 70). This would allow the Social Security credits to continue to grow. For those who turn 62 after 2015, the Act eliminates the ability to file a restricted application for only spousal benefits. Note that individuals who are age 62 or older in 2015 should still be able to use the restricted application method for spousal benefits only upon reaching full retirement age. [Bipartisan Budget Act of 2015, Section 831(a)]

Jeff asks Windus: So is this another example of how the government giveth and the government taketh away?

Windus: It sure is. You see when Congress passed the Senior Citizens Freedom to Work Act in 2000, it introduced a new concept called “voluntary suspension” of benefits, allowing those who had already started Social Security benefits to stop their payments and earn delayed retirement credits. In the process, however, the new voluntary suspension rules unleashed several additional Social Security claiming strategies, including the “claim now, claim more later” tactics I just described which the recent Budget Act will be eliminating.

Jeff states: So by Congress closing these loopholes they are effectively reducing future social security benefits that would have to be paid out thus putting less pressure on the budget and extending the solvency of the Social Security Trust Fund.

Windus replies: Ultimately, that is the effect if these provisions.

Perhaps most notable for the new Social Security crackdown, though, is the effective date for the rules. While the new limits to Restricted Application will not apply to anyone who is already age 62 or older in 2015, the new crackdown will kick in April 30, 2016, grandfathering anyone currently going through file-and-suspend but limiting anyone who tries to suspend benefits thereafter. Beyond that point, anyone who suspends will find that no benefits will be payable until the individual who suspended chooses to reinstate benefits (either to restart them now, or finish waiting until age 70).

Windus continues: Notably, the crackdown on these voluntary-suspension-related tactics doesn’t actually kill the rules for voluntary suspension itself, which remains on the books. But now, aside from a few esoteric scenarios (including the recent Hold Harmless Medicare claiming strategy), voluntary suspension will be relegated to those unique scenarios where someone truly started benefits early, has had a change of mind and wants to stop them (after a year has passed and it’s already too late to withdraw the application) to earn delayed retirement credits, with the plans of starting benefits again at age 70. Of course, ideally those who wish to delay benefits for the value of earning delayed retirement credits will simply delay from the start to maximize the benefit, which makes voluntary suspension a moot point altogether for most retirees in the future.

Jeff asks Windus: Is there a dollar amount that you can associate with these changes?

Windus replies: Well the maximum benefit that a spouse could claim under File and Suspend was limited to 50% of a worker’s Primary Insurance Amount (PIA), which would be 50% x $2,787.80 = $1,393.90/month, or about $16,700 per year. And at the most, the strategy would only unlock four years’ worth of benefits (from when the retiree reached full retirement age at 66, until age 70 when benefits would have started anyway). Nonetheless, the new rules could cut off as much as about $67,000 of benefits over a 4-year time window for those who planned to engage in File-and-Suspend and as much as 3.5 years of benefits for those who were already receiving File-and-Suspend-based benefits.

Jeff asks Windus: But I would figure that when and how you claim social security benefits is just one aspect of what you would consider when making a retirement plan with a client.

Windus replies with her comments on this.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Stay tuned because after the break we are going to tell you some top 2015 year-end tax planning tips you need to be aware of.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

2015 Year-End Tax Planning for Individuals

Jeff states: Well here we are in November and while many people are now thinking about the year-end holiday celebrations, you should also be thinking about year-end tax planning to perhaps save on taxes and use those tax savings instead on your holiday celebrations and gift giving. So in this segment we are going to discuss some tax strategies that you may want to consider.

Jeff asks Amy: Why is it important to know what tax rate or tax bracket one is in?

Amy replies: Well for one thing, the higher the tax bracket you are in, the more valuable and greater tax benefit you can secure with proper tax planning.

Amy continues: For 2015, the top tax rate of 39.6% will apply to incomes over $413,201 (single), $464,851 (married filing jointly and surviving spouse), $232,426 (married filing separately), and $439,000 (heads of households). However, high-income taxpayers are also subject to the 3.8% net investment income tax and/or the 0.9% Medicare surtax. If a taxpayer is subject to one or both of these additional taxes, there are certain actions he can take to mitigate the impact of these additional taxes.

Windus asks: I am a big proponent of funding for retirement, what tax considerations should one be aware in making retirement plan contributions for 2015?

Amy replies: Fully funding a company 401(k) with pre-tax dollars will reduce current year taxes, as well as increase retirement savings. For 2015, the maximum 401(k) contribution taxpayers can make with pre-tax earnings is $18,000. For taxpayers 50 or older, that amount increases to $24,000. For taxpayers with a SIMPLE 401(k), the maximum pre-tax contribution for 2015 is $12,500. That amount increases to $15,500 for taxpayers age 50 or older.

Amy continues: If certain requirements are met, contributions to an individual retirement account (IRA) may be deductible. For taxpayers under 50, the maximum contribution amount for 2015 is $5,500. For taxpayers 50 or older but less than age 70 1/2, the maximum contribution amount is $6,500. Contributions exceeding the maximum amount are subject to a 6% excise tax. Even if a client is not eligible to deduct contributions, contributing after-tax money to an IRA may be advantageous because it will allow the client to later convert that traditional IRA to a Roth IRA. Qualified withdrawals from a Roth IRA, including earnings, are free of tax, while earnings on a traditional IRA are taxable when withdrawn.

Windus asks Amy: Now if a client already has a traditional IRA how would it work if she converted it to a Roth IRA?

Amy replies: The client will have to pay tax on the amount converted as ordinary income, but subsequent earnings will be free of tax. And if the client has a traditional 401(k), 403(b), or 457 plan that includes after-tax contributions, a new rule allows her to generally rollover these after-tax amounts to a Roth IRA with no tax consequences. A rollover of a SIMPLE 401(k) into a Roth IRA may also be available. As with all tax rules, there are qualifications that apply to these rollovers that practitioners should discuss before their clients take any actions.

Jeff states: PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Not all individuals are aware that they could be hit with an additional 3.8% tax on certain net investment income. Amy please tell our listeners about this.

Amy replies: That’s right. A 3.8% tax applies to certain net investment income of individuals with income above a threshold amount. The threshold amounts are $250,000 (married filing jointly and qualifying widow(er) with dependent child), $200,000 (single and head of household), and $125,000 (married filing separately). In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, and income from businesses involved in trading of financial instruments or commodities. Thus, while the top tax rate for qualified dividend income is generally 20%, the top rate on such income increases to 23.8% for a taxpayer subject to the net investment income tax.

Windus asks: Is there any way to avoid this?

Amy replies: One way around the increased tax rate on dividend income is to invest instead in tax-exempt state and municipal bonds. The bonds generate tax-exempt income which isn’t subject to the net investment income tax and is not included in determining if taxpayers meet the threshold amount for being subject to the net investment income tax. Note, however, that such income may be subject to state taxes and the alternative minimum tax.

Windus asks: Does this investment income tax also apply to someone who owns their own business?

Amy replies: Only if that trade or business constitute a passive activity. An activity is not generally considered passive if the taxpayer materially participates in the activity. If a client is engaged in an activity which may be considered passive and thus has the potential to trigger the net investment income tax, steps should be considered to make this investment active to avoid this tax.

Jeff states: Not all individuals are aware that they could be hit with an additional 0.9% tax on their wages and self-employment income. Amy please tell our listeners about this.

Amy replies: That’s right. An additional Medicare tax of 0.9% is imposed on wages and self-employment income in excess of a threshold amount. The threshold amount is $250,000 in the case of a joint return or surviving spouse, $125,000 in the case of a married individual filing a separate return, and $200,000 in any other case. Employers are required to withhold the extra .9% once an individual’s wages pass $200,000. No deduction is allowed for the additional tax. However, married taxpayers may be due a credit if, for example, they use the married filing jointly status, one spouse had wages over $200,000, but joint wages are less than $250,000. On the flip side, married taxpayers may owe the additional .9% if they file jointly and each made under $200,000 of wages but together made over $250,000 in wages.

Jeff states: Now sometimes getting to aggressive with tax deductions could backfire and you can end up owing more in tax. Amy please explain how this could happen.

Amy replies: That would be true where you are subject to the Alternative Minimum Tax. Because many deductions taken for regular tax purposes are not allowed for alternative minimum tax (AMT) purposes, individuals may be subject to the AMT if he or she has excessive deductions. Deductions which typically throw taxpayers into an AMT situation include high state and local taxes, interest on home equity loans, a high number of dependent deductions, and a large amount of miscellaneous itemized deductions. For 2015, the AMT rate is 26% on alternative minimum taxable income (AMTI) up to $185,400 ($92,700 for married filing separately) and 28% on AMTI over that amount. Taxpayers are allowed an AMT exemption depending on filing status, but the exemption is phased out for taxpayer’s above a certain income level.

Since the calculation of the AMT begins with adjusted gross income, lowering your adjusted gross income by maximizing contributions to a tax-deferred retirement plan (e.g., 401(k)) or tax-deferred health savings account may be appropriate. Additionally, if you use your home for business, related expenses (e.g., a portion of the property taxes, mortgage interest, etc.) allocable to Schedule C will also reduce adjusted gross income.

Jeff asks: Amy is there still any legislation that Congress may enact before the end of the year that we need to keep a look out for?

Amy replies: Yes, additional tax benefits may be available if Congress passes Tax Extender legislation introduced in the Senate last August. That legislation would retroactively extend many tax breaks that expired in 2014. If it passes, the bill will extend various tax breaks through 2016 that include the following:

• the exclusion from income of imputed income from the discharge of acquisition indebtedness for a principal residence;
• the tax deduction for mortgage insurance premiums;
• the tax deduction for state and local general sales taxes in lieu of state and local income taxes;
• the deduction from gross income for qualified tuition and related expenses; and
• the tax-free distributions from IRAs for charitable purposes.

Windus asks: Are there any other things to consider before the end of the year?

Amy replies: There are and we call these the “big-picture items”.

Accelerating Income into 2015 – Depending on the client’s projected income for 2016, it may make sense to accelerate income into 2015 if the client expects 2016 income to be significantly higher.

Deferring Income into 2016 – There are also scenarios (for example, if the client thinks that his or her income will decrease substantially next year) in which it might make sense to defer income into 2016 or later years.

Deferring Deductions into 2016 – If a client anticipates a substantial increase in taxable income, practitioners may want to explore pushing deductions into 2016

Accelerating Deductions into 2015 – If a client expects his or her income to decrease next year, accelerating deductions into the current year can offset the higher income this year.

Jeff states: So it really is important that you address your year-end tax planning now and that is where we can help. PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor.  Trilogy Financial Services and NPC are separate and unrelated Entities.

Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Windus, what questions have you pulled for us to answer?

Question from Patricia from San Diego: I am interested in investing in a particular company that has corporate bonds, preferred stock and common stock. What are the differences between each of those types of securities?

Answer: Common stocks are ownership interests in a publicly traded business, and owners of it are called shareholders. If a company liquidates or goes bankrupt, common stock shareholders likely won’t see any equity distribution.

Preferred stocks are less volatile than common stocks, and pay dividends at a regular interval. However, with reduced volatility comes reduced reward, and there is very little chance that a preferred stock will ever produce large capital gains for an investor. On the plus side, if a company becomes insolvent, preferred stockholders are entitled to assets before common stockholders.

Corporate bonds are debts issued by companies. When you buy a bond, you are lending money to the corporation that issued it. The corporation promises to return your money, or principal, on a specified maturity date. Until that time, it also pays you a stated rate of interest, usually semiannually. The interest payments you receive from corporate bonds are taxable. Unlike stocks, bonds do not give you an ownership interest in the issuing corporation. If a company becomes insolvent, bondholders are entitled to assets before any stockholders.

Question from Jose from Chula Vista: My university requires each incoming freshman to come to school with their own computer. Is there any way to deduct the cost of the computer from my tax liability?

Answer: Autos, Computers and other Electronic Devices fall into a category that the IRS calls “Listed Property”. With Listed Property, you not only have to document the cost of the property but also document the business use. The cost of a personal computer is generally a personal expense that is not deductible. However, you may be able to claim an American opportunity tax credit if you are required to have a computer to enroll or attend your university.

The American Opportunity Tax Credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40% of any remaining amount of the credit (up to $1,000) refunded to you.

Be on the look-out for a Form 1098-T Tuition Statement, from your school by January 31. This statement helps you figure your credit. The form will have an amount in either box 1 or 2 to show the amounts received or billed during the year. But, this amount may not be the amount you can claim as it will not include qualified education expenses you paid such as buying that personal computer.

To claim the American Opportunity Tax Credit, you must complete the Form 8863 and attach the completed form to your Form 1040.

Jeff PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Well we are reaching the end of our show.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Windus states: Have a great day everyone!