A few years back, in an interview by Kiplinger's Personal Finance magazine with then head of the IRS Fred Goldberg, he said that millions of Americans overpaid their taxes every year by overlooking just one of the many deductions and/or credits available to them.
Wherever you live, Florida with no State sales tax, or NY with lots of it, Congress made this deduction permanent last year so you get to choose the one that's right for you.
Although not a "deduction" your automatic reinvestment set up for your portfolio increases your tax basis for the funds, which in turn decreases your taxable capital gains.
Such thins as ingredients for casseroles you prepare for a nonprofit organization's soup kitchen and stamps you buy for a school's fund-raising mailing count as charitable contributions. Keep your receipts. If your contribution totals more than $250, you'll also need an acknowledgement from the charity documenting the support you provided.
Student Loan Interest:
Generally, you can deduct interest only if you are legally required to repay the debt. But if parents pay back a child's student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt. So as long as the child is no longer claimed as a dependent, he or she can deduct up to $2,500 of student-loan interest paid by Mom and Dad each year.
If you were looking for a position in the same line of work as your current or most recent job, you can deduct job-hunting costs as miscellaneous expenses if you itemize. Qualifying expenses can be written off even if you didn't land a new job. But such expenses can be deducted only to the extent that your total miscellaneous expenses exceed 2% of your adjusted gross income.
Medicare Premiums if Your Self-Employed:
Those who continue to run their own businesses after qualifying for Medicare can deduct the premiums they pay for Medicare Part B and Medicare Part D, plus the cost of supplemental Medicare (medigap) policies or the cost of a Medicare Advantage plan. This deduction is available whether or not you itemize and is not subject to the 7.5% of AGI test.
Estate Tax on Inherited Income:
If you inherited an IRA from someone whose estate was big enough to be subject to the federal estate tax, you get an income-tax deduction for the amount of estate tax paid on the IRA assets you received.
When you refinance, you can deduct the points on the new loan like you did for your first mortgage, but in this case it must be done over the life of that loan. That means you can deduct 1/30th of the points a year if it's a 30-year mortgage. That's $33 a year for each $1,000 of points you paid—not much, maybe, but don't throw it away.
"American Opportunity" Credit:
This tax credit is based on 100% of the first $2,000 spent on qualifying college expenses and 25% of the next $2,000 ... for a maximum annual credit per student of $2,500. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less ($160,000 or less for married couples filing a joint return). Unlike the Hope Credit that this one replaced, this is good for four years of college, not just the first two.
This credit is worth up to $2,000 a year, based on 20% of up to $10,000 you spend for post-high-school courses that lead to new or improved job skills. Classes you take even in retirement at a vocational school or community college can count.
Social Security Taxes If Self-Employed:
The self-employed have to pay the full 15.3% SS tax - for themselves as the owner and the employee; but, you get to write off half of what you pay.
Taxpayers typically must pay 90% of what they owe during the year via withholding or estimated tax payments. If you don’t, and you owe more than $1,000 when you file your return, you can be hit with a penalty for underpayment of taxes.
But, there are several exceptions to the penalty, including a little-known one that can protect taxpayers age 62 and older in the year they retire and the following year. You can request a waiver of the penalty—using Form 2210—if you have reasonable cause, such as not realizing you had to shift to estimated tax payments after a lifetime of meeting your obligation via withholding from your paychecks.
Legal Fees Paid to Secure Alimony:
Since alimony is taxable income, you can deduct the part of the lawyer’s fee attributable to setting the amount, and the portion of the fee attributable to tax advice.
You have been officially alerted....