You Can Still Claim Certain Deductions.
Filing taxes is a stressful affair, causes anxiety and can be highly confusing. Should you take the standardized tax deduction of $6,200 for singles? Double that amount for couples. Itemizing your tax deductions may give you a bigger refund. Itemizing deductions will necessitate keeping all your medical, tax, and charitable contribution receipts. You will also need to follow all the percentage rules and exceptions. Keep your records from your mortgage company as well as all banking records.
Saving all your receipts is daunting, traumatic and maybe unnecessary. Instead, use the tax breaks that are allowed in addition to the standard deduction. You can find the rules and definitions on lines 23 through 35 of IRS form. There are lengthy discussions in the 1040 instruction booklet.
Adjustments to income, also known as above-the-line deductions, have no income limits. Take as many adjustments to income as you can. Taxpayers in the 35% tax bracket can lower their tax bill by $350 for every $1000 above-the-line deductions. The lower your Adjusted Gross Income (AGI) is, the larger your tax return (or, the less you have to pay the IRS.)
Above the Line Deductions
Employee Business Expenses can be claimed on Schedule A. Add up your business expenses and claim up to 2% of your adjusted gross income. May not sound like a large amount, but every little bit counts.
If you are in the Army Reserve or National Guard, travel to drills more than 100 miles from home and stay overnight, you can deduct the cost of lodging. Furthermore, you can claim deductions of half your meal costs and $.56 per mile your drive to your destination. Just follow the eligibility rules.
Performing artists who make less than $16,000 only need to show the names and addresses (plus tax ID numbers) of at least two employers who paid up to $200 for your services. Once you have gathered up this information, deduct up to 10% of your expenses for training, costuming, travel and lodging.
Those who are disabled, work and incur expenses allowing you to work can deduct the amount you paid. As an example, sign-language interpreters you hired for meetings.
If you have a high-deductible health plan and fund a health savings account or HSA, you can get an above-the-line deduction for contributions if you made these contributions with after-tax money. If you contribute using pretax funds through payroll deductions, there is no write-off. However, you will need to file a Form 8889 if you contribute to an HSA either with pre or post monies.
Changing jobs and moving more than 50 miles away from your old home, may give you an extra tax break. Deduct the costs of getting yourself and your household goods to your new home. If you drive your own car when moving, deduct 23.5 cents a mile plus parking and tolls. Fill out forms 3903 to take this deduction. You will need to include this form with all other IRS tax filing forms.
Self-employed taxpayers have to pay the employer’s and the employee’s share of Social Security and Medicare. Social Security payments workout to be 15.3% of your net self-employment income. You can write off half of what you pay in these taxes as an adjustment to income. Look into deducting contributions to a self-directed retirement plan, too. Investigate a SEP or SIMPLE plan to maximize your retirement savings.
If you used your certificate of deposit (CD) early, you probably got hit with a bank fine. Bank penalties are different from bank to bank, but this penalty can be deducted no matter how small or large. Use Form 1099-INT or Form 1099-OID from the bank. These forms list any penalties assessed.
Deduct alimony as long as you list the monetary payments exactly as written in the divorce decree. Report your ex-spouse’s Social Security number. The IRS will make sure you both report the same amount. Alimony paid to your spouse will be considered as income for them.
If you have taken out a student loan for you, your spouse or a dependent, you can take up to $2,500 in interest deduction. Your modified adjusted gross income must be is less than $75,000 if you are single. You can make no more than $150,000 if you file a joint return. Earn more than $80,000 or $160,000, and you will not be able to take any deduction for education.
Retirement contributions to a traditional IRA are a good move. You can boost retirement savings and lower your tax bill. The contribution limit is $5,000 for 2014, but this deduction disappears above certain income levels. You can make a 2014 IRA contribution up until April 15, 2015.
If you are an entrepreneur who physically creates something, grows an item or personally mines something, you can take a deduction of up to 9% of the income that comes from your activities. This can be a very difficult deduction to claim, but give this deduction a good long look. It could add more money to your refund amount. It is recommended that you keep all records to prove this deduction.
Asked to serve on a jury? Most companies continue to pay an employee’s salary while they serve on jury duty. Some companies ask for the amount you earn as a juror go to the payroll department. You do need to report to the IRS any jury duty pay you receive. The pay for doing your duty is very low, but it is still income. You can deduct the amount you give to your employer as an above-the-line deduction.
Taxes are heartbreaking, especially when you owe. Give yourself a chance and take as many deductions as you can. It might even pay to compare both deduction options. Take the one that gives you the most return or lowers your tax bill. You have almost four full months to do comparisons. It may be well worth the effort.
