Direct Tax Law Questions
What is direct tax?Direct tax is a tax that applied to an individual or property directly such as property tax. Direct taxes are something that an individual is unable to avoid or pass on to someone else, like is done with indirect taxes. For example an indirect tax is only applied when a transaction that is taxable occurs, where a direct tax is usually imposed in an unconditional way.
If an individual goes to college what kind of direct tax credit may the individual receive?If an individual goes college and pays the expenses that are qualified along with the fees for a secondary education at an accredited educational institution, then there are many direct tax credits or deductions that are available. There are three basic types of credits and deductions that are available. The first is the tuition and fees deduction that would allow the individual to have a deduction of up to $4,000 a year from their taxable income. The second is called the Hope Credit; it can allow an individual a direct tax credit of up $1,650 per student attending college. The third is the Lifetime Learning Credit which would allow an individual to get up to a $2,000 direct tax credit per return. Of course there are rules and requirements for each that have to be met and are dependent on the individual’s income level, but an individual may qualify for any of the credits mentioned.
Is there a direct tax credit for pulling money out of retirement to pay the difference left on a mortgage after the house has been sold?There are no direct tax credits for retrieving monies from an individual retirement plan. Even if the early retrieval were to make up the difference left on a mortgage after selling a home.
Is repayment of overpayment for disability able to be taken as a direct tax deduction or credit?If an individual has been asked to make repayment of monies that they have claimed as income in previous year’s tax returns, then the individual will be able to claim a direct tax deduction. There are two different ways for an individual to do this. The first is that the individual can claim the whole amount that was repaid as a portion of their itemized deductions. The second is the individual can go back through all of the prior years that were involved in the overpayment and make recalculations for their taxes as if the overpaid amount had not been included in their income. If an individual does this they will then have to add up all the differences and take a direct tax credit for that amount against what the individual may owe against the year current.
Direct tax is a tax that is applied to a person or property in an unconditional manner, rather than a use or consumption manner. A person who is attending college may be able to receive a direct tax credit for their tuition. Any questions regarding direct tax laws can be directed to the Experts.