Don’t Miss these Tax-Saving Tips

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If you have not yet gotten around to filing your 2016 taxes, below is a list of some of the most often overlooked tax write-offs. Use these tips to potentially cut your tax bill and keep more money in your pocket.

We’ll start with a Win Win favorite – charitable contributions:

Out-of-Pocket Charitable Contributions

It’s hard to overlook the big charitable gifts you made during the year by check or payroll deduction. But the little things add up, too, and you can write off out-of-pocket costs you incur while doing good deeds. Ingredients for casseroles you regularly prepare for a nonprofit organization’s soup kitchen, for example, or the cost of stamps you buy for your school’s fundraiser count as a charitable contribution.

For a list of local charitable non-profits, please click here to see the folks on our list.

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State Tax Write-Offs

This write-off is primarily for those who live in states that do not impose an income tax. You must choose between deducting state and local income taxes, or state and local sales taxes. For most citizens of income-tax states, the income tax deduction usually is a better deal. IRS has tables for residents of states with sales taxes showing how much they can deduct. But the tables aren’t the last word.

Union Dues

If you belong to a labor union and you pay dues every year, deduct them.

Student Loan Interest Paid by Parents

In the past, if parents paid back a student loan incurred by their children, no one got a tax break. To get a deduction, the law said that you had to be both liable for the debt and actually pay it yourself. But now there’s an exception. If Mom and Dad pay back the loan, the IRS treats it as though they gave the money to their child, who then paid the debt. So a child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student loan interest paid by Mom and Dad.

First Jobs and New Jobs

While job-hunting expenses incurred while looking for your first job are not deductible, moving expenses to get to that first job are. And you get this write-off even if you don’t itemize. If you moved more than 50 miles, you can deduct 23 cents per mile of the cost of getting yourself and your household goods to the new area, (plus parking fees and tolls) for driving your own vehicle.

Costs associated with looking for a new job in your current occupations are tax-deductible. This includes fees for resume preparation and employment of outplacement agencies.

Child and Dependent Care Tax Credit

It’s easy to overlook the child and dependent care credit if you pay your child care bills through a reimbursement account at work. This is a tax credit which will reduce your tax bill dollar for dollar, so do not miss it.

Earned Income Tax Credit (EITC)

Twenty five percent of taxpayers who are eligible for the Earned Income Tax Credit fail to claim it, according to the IRS. Some people miss out on the credit because the rules can be complicated. Others simply aren’t aware that they qualify.

The EITC is a refundable tax credit – not a deduction – ranging from $506 to $6,269 for 2016. The credit is designed to supplement wages for low-to-moderate income workers. But the credit doesn’t just apply to lower income people. Tens of millions of individuals and families previously classified as “middle class” – including many white-collar workers – are now considered “low income” because they:

  • lost a job
  • took a pay cut
  • or worked fewer hours last year

If you were eligible to claim the credit in the past but didn’t, you can file any time during the year to claim an EITC refund for up to three previous tax years.

State Tax Paid Last Spring

Did you owe taxes when you filed your 2015 state tax return in 2016? Then remember to include that amount with your state tax itemized deduction on your 2016 return, along with state income taxes withheld from your paychecks or paid via quarterly estimated payments.

Refinancing Mortgage Points

When you buy a house, you get to deduct points paid to obtain your mortgage all at one time. When you refinance a mortgage, however, you have to deduct the points over the life of the 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.

Cleaning Up

Cleaning and laundering services when traveling are deductible as long as they aren’t reimbursed by your employer.

 

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Charitable Tax Deductions

Good ole Uncle Sam is knocking at your door again.  It’s TAX TIME.  You can just hear the sound of accountants exclaiming "Uncle Sam - It's Tax Time"across the US “where are your deductions?”  Deductions?  Can I deduct travel expenses?  What about the clothes I donated to Good Will?  Can I deduct the Big Mac I just ate?  Well, I’m no accountant, but I can tell you that those donations to Good Will are definitely deductible if you are itemizing your taxes.  Donations to qualified non-profit, charitable causes are deductible.  Now is the time to get your paperwork together so you can make sure that you receive any deductions you deserve. Here’s what you should know about the tax benefits of giving to charity.  Again, be sure to consult your own tax adviser about your specific tax situation.

1. How Does the Income Tax Deduction for a Charitable Donation Work?

If you itemize deductions on your tax return, you may be able to take an income tax deduction for a gift to a qualified charitable organization. The actual cost of your donation is therefore reduced through your savings on your taxes. For instance, if you are in the 33% tax bracket, you would save $33 on a donation of $100.

2. When Can a Charitable Contribution Deduction be Taken?

Your donation to a qualified charity is deductable the same year in which it is made. The contribution is considered paid when you put the check in the mail, or when it is charged to your credit card (not when you pay the credit card company).

3. What Charitable Organizations Are Considered Qualified?

Most charitable organizations qualify for a charitable contribution deduction, but not all. Look for the 501(c)(3) designation to be absolutely sure. Tax deductions are not allowed for donations to an individual, a foreign government, foreign charities, and certain private foundations.

4. Is There a Charitable Tax Deduction for Giving Internationally?

We are all concerned about good causes abroad, and most of us do want to give globally. But, what are the implications for your charitable tax deduction? If the charity is registered in the U.S. as a charitable organization, you can take a deduction for your donation. If the charity is not registered, there is no tax deduction. Many, many nonprofits that are registered in the U.S. provide international aid.

5. Is There a Limit on How Much I Can Donate and Still Get A Tax Deduction?

There are no limits on charitable contributions for most of us. Limits come into play only if you contribute more than 20% of your adjusted gross income to charities. If you are in this category, be sure to consult with your tax adviser to see if your deductions will be limited.

6. How Do I Handle Deductions for Non-Cash Donations to a Charity?

There are rules for non-cash donations such as property or outdated clothing, household furnishings, or office equipment.

For property owned for more than a year, the deduction is usually equal to the property’s fair market value. Appreciated property can be deducted at the full fair value of the property, meaning that you are never taxed on the appreciated amount.

Donated goods must be in “good condition or better,” according to the IRS. You must have a receipt for the goods from the charity to claim a deduction. If you donate non-cash items with a total value of more than $500, you must file Form 8283 with your return. You may need a qualified appraisal if you donate an item or a group of items with a value of more than $5,000.

7. Can I Get a Deduction for Donating My Car?

Making a car donation to a worthy charity seems like a good move, but, unfortunately, car donation is an area of charity that is rife with fraud and misleading information. Check out our suggestions for a happy outcome for you, the charity, and your car.

8. Can I Take a Deduction for My Volunteer Work?

No, you can’t deduct the value of your time spent on charitable work as a charitable donation, but you can deduct your out-of-pocket costs such as mileage.

9. What Documentation Is Required for Deductions for Charitable Contributions?

As of 2007, the IRS requires that if you claim a deduction of a monetary donation of any amount, you must have a written confirmation from the charity. You cannot deduct casual donations that you drop into a charity’s collection box or bucket without a receipt to back up your claim.

If you receive some goods or services in exchange for your donation, the charity must specify the value of those goods or services. You can only deduct the amount of your donation that is above that value. For instance, if you donate $500 to the symphony and receive tickets worth $200 in exchange, you can only take a deduction on $300. The paperwork from the charitable organization should spell out what is deductible.

10. When Can I Claim a Deduction for My Haiti Donation Made in 2010?

If you made a donation (and itemize your deductions) to the Haiti relief efforts in early 2010, you can take the deduction on your 2009 tax return or take the deduction in 2010.To take the deduction for 2009, your donation needs to be made by the end of February.