When preparing for tax time, you want to ensure that you received every dollar back you’re entitled to, remember taxes are enforced extractions and not voluntary contributions. Yet, with the IRS tax code being over 70,000 pages, it’s unlikely you’re aware of every deduction you may be eligible for.
Here are a few deductions that you may have overlooked provided by our New England CPA’s.
State Sales Tax
If you live in a state with no state income tax, such as New Hampshire, you may feel shorted at tax time since there are no state income taxes to deduct.
As an alternative for these taxpayers, the IRS allows you to deduct any sales taxes that you have paid throughout the year.
If you haven’t kept records of each purchase that you’ve made all year, the IRS has a state sales tax calculator, specific for each state.
If you made a number of large purchases, such as purchasing a new vehicle, over the course of the year, it’s a good idea to keep your receipts for documentation come tax time.
Live in state with an income tax? If your sales tax paid is larger than your state income tax you may deduct the larger of the two, but you can’t deduct both.
Many taxpayers know that they can deduct the mortgage interest associated with their home in most cases. How about if you refinance? If you have recently refinanced your home, you may deduct 1/30th of the points paid each year. If you sell your home prior to the end of this term, you are entitled to deduct any remaining points. Just keep in mind that you can’t deduct all of the points in one year on a refinance of your mortgage. If you pay points on your original mortgage, then you may be able to deduct the points in one year.
Job Hunting Costs
Looking for a new job can be time consuming and expensive. Uncle Sam wants to reward you for your efforts. Job hunting expenses include items such as printing costs, transportation costs, and employment agency fees. These expenses must exceed 2% of your adjusted gross income before they are deductible. Make tax time a little less burdensome by taking advantage of some of these tax deductions.
For more information about deductions you may be eligible for or to schedule an appointment, please feel free to contact us today!
If you are saving for retirement via a Traditional IRA, you may be able to deduct the amount of your contribution. The amount that you are able to deduct is dependent on a couple of factors including whether or not you are covered by a retirement plan at work and your level of income.
For those with a retirement plan at work single taxpayers whose Modified AGI is less than $71,000 may qualify for this benefit.
Married taxpayers filing a joint return must have Modified AGI of less than $118,000.
As a taxpayer who is married and filing a separate return, your Modified AGI must be less than $10,000 in order to receive any benefit.
For those that are not covered at work by a retirement plan, the income requirements are far less restrictive.
Single taxpayers and married taxpayers where the spouse is also not covered by a plan may take the deduction at any level of income.
When the spouse is covered by plan while at work, married taxpayers filing a joint return must have a modified AGI of less than $194,000, while those filing a separate tax return are limited to a maximum modified AGI of less than $10,000.
If you paid alimony during the tax year, this amount is deductible on your Form 1040. It is important to note that the amount must be considered to be alimony per the divorce decree. Child support payments and other property settlements do not qualify for this deduction.
Home Sale Expenses and Capital Improvements
When you sell your home, any commissions paid to real estate brokers and other closing costs are deductible as a part of the sale. The cost of any improvements you have made to the property over the years are also included. These are added to the cost basis of your home and reducing the amount of the potential gain made on the sale of the residence.
Health Care Insurance
If you are self-employed, you can deduct the amount you pay for medical and dental insurance for you and your spouse, along with any dependents who are under the age of 27 at the end of the year.
If you’ve volunteered your time during the tax year, you may be able to deduct some of the related expenses. While the value of any services you have provided do not qualify, you can deduct things like the cost of gas or mileage associated with your good deed.
Long-Term Care Insurance Premiums
If you have purchased an insurance policy for long-term care, these insurance premiums may qualify for a deduction on your return. You may also deduct the cost of any medical expenses related to qualified long-term care services. Financial Advisor If you engage the counsel of a financial professional, who advises you on your investment portfolio, the cost of the fees paid for these investment advisory services are a deductible expense. Reviewing your records at tax time can save you a lot of money.
If you have any questions about these tax deductions or any other tax issues, please feel free to contact our office for more information. We can be reached at email@example.com or (855) 479-2400.