Tax breaks you can use as deadline nears
A few quick Q&As to help as the tax deadline looms:
QUESTION: Are food stamps taxable?ANSWER: No.
QUESTION: What about unemployment benefits?ANSWER: For 2009 only so this does not apply to the tax return you need to file by April 15 for 2008 you can exclude from your income up to $2,400 of unemployment benefits, says Bob Scharin, senior tax analyst with the tax and accounting business of Thomson Reuters.
QUESTION: What about canceled debts?ANSWER: If it's credit card debt, that canceled debt is usually taxable income. But, there's an exception if you are in bankruptcy or if your are considered insolvent. Scharin says the IRS defines insolvent as your assets are less than your liabilities.
QUESTION: What if I sold my home in a short sale?ANSWER: Your lender will probably send you a 1099 form, which reports income from a real estate transaction. But you may not have to add that to your taxable income. Scharin said that the canceled mortgage debt is not income to you if: It was for your primary mortgage on your principal residence; if the debt was canceled between 2007 and the end of 2012; if it's not over $2 million. Under recent tax law changes, if you meet those provisions, you don't have to pay tax on a mortgage that is forgiven.
QUESTION: Anything else about the tax code that can help in these tough times?ANSWER: If you've had a big drop in your income, you should look over your return one more time. You may now be able to squeeze in some deductions or tax credits that you couldn't take when your income was higher.