With tax time here, now is the time to consider how you want to claim -- the standard deduction or file an itemized income tax return. Why should you do this? It’s simple. Often overlooked deductions can make a HUGE difference in lowering your tax bill if you decide to itemize.
With tax time here, now is the time to consider how you want to claim -- the standard deduction or file an itemized income tax return. Why should you do this? It’s simple. Often overlooked deductions can make a HUGE difference in lowering your tax bill if you decide to itemize.
The standard deductions are fine for those who have an uncomplicated tax situation. But the amount of your mortgage interest payments, state taxes, property taxes, charitable contributions and hurricane losses, if any, could be more than the standard deduction that is given. What does this mean? If you do not itemize, you may not save as much as you are entitled to. With this in mind, you should take a look over the following list of often missed credits and reductions before you start the process of completing your 2009 tax return:
1. Education Expenses: There are many education related deductions and credits available to you if you are making tuition payments, paying off your college degree or student loan interest or just saving for your child’s education. You then owe it to yourself to check out the explanation of education tax benefits available on the IRS website. http://www.irs.gov/
2. Deductions for Home Office: Are you self employed? Is your home office your principal place of work? Is your gross income more than your related deductions? You should then be able to claim this deduction. Are you employed by a company? If so you can deduct the home office ONLY if it is for your employer’s convenience. taxes You MUST also pass the “exclusive use” rule to qualify for deducting a portion of your home’s expenses, including mortgage interest, real estate taxes or rent, utilities, property maintenance (mowing, snow removal) or even repairs. Caution, this is a RED HOT issue for the IRS so be certain you pass the “exclusive use rule”. If you don’t have an office in your home, you may still deduct your mortgage interest and real estate taxes on both your main residence and any second home.
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3. Deductions for Charity: You can deduct all that you have given to charity, especially if you have given cash gifts, or in-kind donations of clothing, toiletries, food or appliances that you can then deduct at fair market value. You should go through your receipts and your credit card statements to make sure you don’t forget all that you have given. Only donations to 501 (c)3 organizations qualify. If you donate items other than cash and the amount is over $500, you must have a receipt from the organization who received your donation. Also remember that the IRS will want to see proof of cash donations, such as checks, stubs or statements from the charity.
4. Miscellaneous Expenses: Did you know that gambling losses, job search expenses, safe deposit fees, subscription to investment publications and even tax return preparation expenses could be claimed as tax deductions? Also, unreimbursed business expenses may be eligible to be claimed as a deduction. Your total miscellaneous expenses, however, must exceed 2% of your adjusted gross income to qualify.
5. Don't pay in cash: Cash may be convenient but it's also practically guaranteed to be forgotten come tax time, unless you're one of those folks who's great at writing down every single purchase. In some cases, if you do not get a receipt when you pay in cash, you will be unable to make a deduction. When you can, write out a check or use your debit card so you can prove the purchases for the doctor visit, charitable donations and business expenses; the IRS considers a canceled check or credit card/debit card receipt to be appropriate for purposes of record-keeping.
6. Other itemized deductions: Florida doesn’t have an income tax, so for the year 2009 Form 1040, you may deduct sales taxes you pay. You can either use your actual sales taxes paid or use the IRS table. If you don’t itemize, and use the IRS table, then you can also deduct the sales tax you paid on big ticket items such as Cars, Furniture household items like a new kitchen. Also, if you are a teacher, you may deduct up $250 for any school supplies you purchase. This year the energy tax credit has been extended, so if you purchased a new water heater, air conditioner, solar device, or impact windows, you might be entitled to a $1500 tax credit
7. Capital Losses: With the market downturn in 2009, you can deduct up to $3000 in NET losses on investments. Any losses in excess of that may be carried over to 2010.
8. Earned Income Credit: Those taxpayers whose income is below a certain level and who have dependents may also qualify for additional tax credits. If the credit results in a refund, the IRS will mail it to you.
9. Education and Child Care Credits: Depending on your circumstances, you may be eligible for tuition payments for your dependents’ college expenses. For those of you who have children in daycare, there is also a credit for the amount you pay to your daycare provider. You MUST have a receipt from the provider listing their name, address, amount you paid and their Tax Identification Number.
10. Medical deductions: Be sure to include your payments for medical insurance if you receive Medicare. You may also be able to deduct medical insurance premiums, co-pays, other out of pocket expenses, hospital, doctor, dentists and any other medical visits. Remember that there is a 7 ½% take away before you can itemize.
11. LASTLY: Be sure to include ALL your W’2’s, Form 1099’sand any other documents which report income to you, such as bank or brokerage statements.
Tax Deduction ChecklistThe best tax deductions checklists are found in three places:
1. Your past years' tax returns 2) With your tax professional 3) Through an online tax website
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The IRS website provides plenty of useful information on tax filing which could end up saving you a lot of money on this year’s tax return. Take a few minutes to go over all the information you have on taxes so you can save yourself the most in the end.2010 tax return
CHOOSE YOUR TAX FILING METHOD! You may wish to hire a tax professional if you have had any major changes to your income such as an inheritance, lottery winnings, an investment windfall, or the like, or simply feel overwhelmed at the thought of the task. On the other hand, if your goal is to prepare your own tax return, there are great software programs for help with tax preparation, such as TurboTax, Quicken, or TaxAct. These programs are inexpensive and will walk you through your tax return with a series of questions that make it a relatively painless process.
INFORMATION PROVIDED ABOVE MAY NOT BE OF USE TO YOU AND THEREFORE YOU SHOULD CONSULT A TAX PROFESSIONAL CONCERNING YOUR ELIGIBILTY TO USE A DEDUCTION. EVERY PERSON’S SITUATION IS UNIQUE.
