Preparing all year long and having a good filing system in place will make tax filing time much easier and less stressful
That way we can be sure to take advantage of every possible deduction.
Don't wait for the week or month before April 15th to get your stuff together.
Documents & receipts are the most important things to retain in order to substantiate your deductions.
For more FREE tax tips click here: www.ashetax.com
Form 2106: Very often overlooked, there maybe expenses that you spend out of your own pocket for your job/profession that your employer does not reimburse you for. This could be for uniforms, meals if you work in the field, supplies and/or tools, auto/truck expenses, tolls, continuing education, memberships to professional organizations and marketing. Yes, even as a W-2 employee you could benefit from these non-reimbursed expenses. Unfortunately, commuting to and from an office is not a deductible expense.
Medical Expenses: Don't forget the cost of your health insurance, including Part-B of Medicare, your Medicare Supplement Insurance, Long Term Care, Hospital Insurance, Catastrophic Illness Insurance, Disability Insurance, Prescription Plans, Dental and Vision. These are all includable in addtion to deductibles and co-payments that you pay out of pocket for healthcare and can end up saving you tax dollars.
Micellanous Deductions: Certain expenses that people often overlook are Management Fees on your brokerage account, certain legal fees such as Estate Planning, Divorce or advice for a business or investment, accounting and tax return preparation fees.
Tax Credits: Be aware that our government is still giving many tax credits on things like college education, post graduate education, continuing education, electric vehicles, solar power, energy star rated home improvements like insulation, refrigerators, roofing, hot water heaters, new windows and doors and several others. Most of the time the person you are purchasing these types of items from will make you aware of the credits, but not always. Therefore, check with your tax preparer if you are entertaining the purchase of items that could give you a tax credit.
Donations: Do not forget to get receipts for personal items that you donate to organizations like Goodwill and the Salvation Army. They are always willing to provide them. Make a list of the items to keep with your receipt of what you donated with a realistic estimate of what you orignally paid for them. Depending on their condition at the time you donate them, the rule of thumb is to take 10 - 25% of the original purchase price for the item to determine your Fair Market Value (FMV). Your FMV is the amount you will use as your deduction. If you take more than 25% of the original price you will bring up a red flag and most likely would be questioned by the IRS.
Additionally, if you donate goods with a FMV of $ 5,000.00 or more, you will need additional substantiation in the form of the actual receipts of what you originally paid for the items or pay an appraiser to appraise what you are donating. Otherwise, the IRS will disallow the deduction.
Home Improvements: Many people have the mis-conception that home improvements and even home maintainence are tax deductible. They are not. The only way home maitainence is deductible is if you run a business from your home and you take a home/office deduction, which in itself is tricky and could raise red flags if not done correctly.
Home Imporvements that are considered capital improvements which means they become part of the house when complete (EX: new roof, paint, wallpaper, siding, windows, new utilites, new bath or kitchen, in-ground pool, hot-tub, etc.), get added to the cost basis of what you originally paid for the home and will be used to reduce or eliminate any potential capital gains. Therefore, it is still very important to keep your receipts for these major improvements, even if you don't sell your home for another twenty years.
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