Use Miscellaneous Deductions to Reduce Your Taxes

Reduce Your Taxes with Miscellaneous Deductions

 

If you itemize deductions on your tax return, you may be able to deduct certain miscellaneous expenses. You may benefit from this because a tax deduction normally reduces your federal income tax.

Here are some things you should know about miscellaneous deductions:

Deductions Subject to the Two Percent Limit. You can deduct most miscellaneous expenses only if they exceed two percent of your adjusted gross income. These include expenses such as:

• Unreimbursed employee expenses.
• Expenses related to searching for a new job in the same profession.
• Certain work clothes and uniforms.
• Tools needed for your job.
• Union dues.
• Work-related travel and transportation.

Deductions Not Subject to the Two Percent Limit. Some deductions are not subject to the two percent of AGI limit. Some expenses on this list include:

• Certain casualty and theft losses. This deduction applies if you held the damaged or stolen property for investment. Property that you hold for investment may include assets such as stocks, bonds and works of art.
• Gambling losses up to the amount of gambling winnings.
• Losses from Ponzi-type investment schemes.

Many expenses are not deductible. For example, you can’t deduct personal living or family expenses. Report your miscellaneous deductions on Schedule A, Itemized Deductions. Be sure to keep records of your deductions as a reminder when you file your taxes in 2014.

Tax Planning in July, What to Do, What to Watch Out For

I know, you just filed your taxes, or worst you have applied for an extension and plan to file by October 15th of this year for 2012.

The truth is, savvy taxpayers are planning for their 2013 tax year now.  Here  is a list of task they complete in order to fine tune their taxes for the coming year:

1.  They have a copy of their last pay check stub in June of 2012.  They will visit either Forbes article and links to tax calculator, or the IRS tax calculator web site and put in the necessary information to determine if they will owe taxes or will receive a refund.

2.  They will input their 2013 tax information into their 2012 tax software to get a solid idea of what they will be up against in 2013.  They will remember that they are using the tax tables for 2012.  They ALSO will remember that Congress may make some last minute tax changes towards the end of the year.

3.  They will try to leave an opening to respond to last minute tax law changes.  (Like giving more to charity or paying a second or third mortgage payment in December, which will increase their mortgage interest for the year.

4.  If they are expecting a new baby in the family, they will check with the doctor to be sure the kid will arrive prior to December 31st!  If the doctor said twins, they will will want to make twice as sure of the delivery date!

5.  If they haven't purchased a home, and their tax planning show an amount owed, then they are making the necessary arrangements to purchase property ASAP

6.  If they have stock that hasn't moved in recent years, and they aren't even sure that the company is still in existence, they will want to prepare to take a lost on the stock.  If they are concerned about a stock that has no possibility of recovering, then they will sell the stock now, to be sure that they get at least a $3000 loss. 

7. They are eyeing certain furniture, clothing and household items that they can truck over to the Goodwill and get a written receipt for the donation.  Of course they are also shopping for the replacement of the furniture, clothing and household items.

8.  They are looking at qualified exempt organizations, which they can write a check (cash) and receive confirmation in writing. 

9.  They actually spend an evening doing "what ifs" to determine if it might be better to turn in the car and lease a car in the business name.  If they don't have a business, yet they have a large write-off in miles driven for work, they are reviewing all of the possibilities to get the largest tax write off.

10.  Most importantly, they are making sure that they don't trigger the AMT (Alternative Minimum Tax) on their 2013 tax-return.  You can learn more about the AMT tax by visiting the IRS web site; AMT Tax.  In summary the AMT  tax is imposed at a nearly flat rate on an adjusted amount of taxable income above a certain threshold.  It can get a little complicated.  If you trigger this tax, contact an experienced tax professional to help determine what you can do to try and avoid the tax.
(Line 45 Form 1040; 2012; Form 6251)

If you are set to earn over $250,000 in 2013, this article won't do you much good, it is highly recommended that you contact your CPA, immediately.

Child Care Tax Credit for Children Under 13, Including Summer Care

 

Parents should note that they won't be able to deduct child care cost, unless they can provide a Tax ID for the Child Care Provider.  Also parents should be aware that if a child care provider comes to your home, you may be considered as a household employer.  

 

Also this tax credit applies to children who are under the age of 13, and includes day camps, but not overnight camps.  Parents cannot include the cost of child care cost that is provided by a spouse, or a person who is your dependent.  This usually includes older sisters and brothers who live in the household.

 

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Keep the Child Care Credit in Mind for Summer

If you are a working parent or look for work this summer, you may need to pay for the care of your child or children. These expenses may qualify for a tax credit that can reduce your federal income taxes. The Child and Dependent Care Tax Credit is available not only while school’s out for summer, but also throughout the year. Here are eight key points the IRS wants you to know about this credit.

 

1. You must pay for care so you – and your spouse if filing jointly – can work or actively look for work. Your spouse meets this test during any month they are full-time student, or physically or mentally incapable of self-care.

 

2. You must have earned income. Earned income includes earnings such as wages and self-employment. If you are married filing jointly, your spouse must also have earned income. There is an exception to this rule for a spouse who is full-time student or who is physically or mentally incapable of self-care.

 

3. You must pay for the care of one or more qualifying persons. Qualifying children under age 13 who you claim as a dependent meet this test. Your spouse or dependent who lived with you for more than half the year may meet this test if they are physically or mentally incapable of self-care.

 

4. You may qualify for the credit whether you pay for care at home, at a daycare facility outside the home or at a day camp. If you pay for care in your home, you may be a household employer. For more information, see Publication 926, Household Employer's Tax Guide.

 

5. The credit is a percentage of the qualified expenses you pay for the care of a qualifying person. It can be up to 35 percent of your expenses, depending on your income.

 

6. You may use up to $3,000 of the unreimbursed expenses you pay in a year for one qualifying person or $6,000 for two or more qualifying person.

 

7. Expenses for overnight camps or summer school tutoring do not qualify. You cannot include the cost of care provided by your spouse or a person you can claim as your dependent. If you get dependent care benefits from your employer, special rules apply.

 

8. Keep your receipts and records to use when you file your 2013 tax return next year. Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your return

One Simple Way to Lower Your Taxes; IRA Contribution "Before" April 15th

One quick and legal way to lower your tax liability is to make a contribution to your IRA account "before" April 15th.  Below is a message from the IRS on doing just that!

 

 

Top Ten Tips on Making IRA Contributions

 

The IRS has 10 important tips for you about setting aside money for your retirement in an Individual Retirement Arrangement.

1. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.

 

2. You must have taxable compensation to contribute to an IRA. This includes income from wages, salaries, tips, commissions and bonuses. It also includes net income from self-employment. If you file a joint return, generally only one spouse needs to have taxable compensation.

 

3. You can contribute to your traditional IRA at any time during the year. You must make all contributions by the due date for filing your tax return. This due date does not include extensions. For most people this means you must contribute for 2012 by April 15, 2013. If you contribute between Jan. 1 and April 15, you should contact your IRA plan sponsor to make sure they apply it to the right year.

 

4. For 2012, the most you can contribute to your IRA is the smaller of either your taxable compensation for the year or $5,000. If you were 50 or older at the end of 2012 the maximum amount increases to $6,000.

 

5. Generally, you will not pay income tax on the funds in your traditional IRA until you begin taking distributions from it.

 

6. You may be able to deduct some or all of your contributions to your traditional IRA.

 

7. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure the amount of your contributions that you can deduct.

 

8. You may also qualify for the Savers Credit, formally known as the Retirement Savings Contributions Credit. The credit can reduce your taxes up to $1,000 (up to $2,000 if filing jointly). Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the Saver’s Credit.

 

9. You must file either Form 1040A or Form 1040 to deduct your IRA contribution or to claim the Saver’s Credit.

 

10. See Publication 590, Individual Retirement Arrangements, for more about IRA contributions.

Doing Your Own Taxes; Five Ways to Lower Your 2012 Taxes

 

A tax credit is a good thing and helps to reduce your tax liability.  When preparing your own taxes, the single largest mistake is over looking tax credits which you may qualify for.

 

Below are five tax credits the IRS wants to remind you of. 

 

 

Five Tax Credits that Can Reduce Your Taxes

 

A tax credit reduces the amount of tax you must pay. A refundable tax credit not only reduces the federal tax you owe, but also could result in a refund.

Here are five credits the IRS wants you to consider before filing your 2012 federal income tax return:

1. The Earned Income Tax Credit is a refundable credit for people who work and don’t earn a lot of money. The maximum credit for 2012 returns is $5,891 for workers with three or more children. Eligibility is determined based on earnings, filing status and eligible children. Workers without children may be eligible for a smaller credit. If you worked and earned less than $50,270, use the EITC Assistant tool on IRS.gov to see if you qualify. For more information, see Publication 596, Earned Income Credit.

 

2. The Child and Dependent Care Credit is for expenses you paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent. The care must enable you to work or look for work. For more information, see Publication 503, Child and Dependent Care Expenses.

 

3. The Child Tax Credit may apply to you if you have a qualifying child under age 17. The credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return. You may be required to file the new Schedule 8812, Child Tax Credit, with your tax return to claim the credit. See Publication 972, Child Tax Credit, for more information.

 

4. The Retirement Savings Contributions Credit (Saver’s Credit) helps low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or a retirement plan at work. The credit is in addition to any other tax savings that apply to retirement plans. For more information, see Publication 590, Individual Retirement Arrangements (IRAs).

 

5. The American Opportunity Tax Credit helps offset some of the costs that you pay for higher education. The AOTC applies to the first four years of post-secondary education. The maximum credit is $2,500 per eligible student. Forty percent of the credit, up to $1,000, is refundable. You must file Form 8863, Education Credits, to claim it if you qualify. For more information, see Publication 970, Tax Benefits for Education.

The Following Tax Credits Count Really Big

Any of the following tax credits, you may be able to SUBTRACT from your income tax.  Review them mid-year to see if you might qualify by the end of the year:  (A small step in tax planning)

Alternative motor vehicle

Alternative fuel vehicle refueling property

Child and dependent care

Child tax credit

Credit to holders of tax credit bonds

Education

Elderly or disabled

Electric vehicle credits

Foreign tax

Mortgage interest

Prior year minimum tax

Residential energy

Retirement savings contributions

Thirty one Tax Credits for Business Owners, Lower Taxes By Using These Tax Loopholes

Below are all the Business Tax Credits for 2011 - There may be some changes for 2012, however this list of credits will enable small business owners with the ability to use the credits to their tax advantage: (These tax credits related directly to Form 1040 - Schedule C)

1. Agricultural chemicals security credit (Form 8931). This credit applies to qualified agricultural chemical security expenses paid or incurred by eligible agricultural businesses. For more information, see Form 8931.

2.  Alcohol and cellulosic biofuel fuels credit (Form 6478). This credit consists of the alcohol mixture credit, alcohol credit, small ethanol producer credit, and cellulosic biofuel producer credit. For more information, see Form 6478.

3.  Alternative fuel vehicle refueling property credit (Form 8911). This credit applies to the cost of any qualified fuel vehicle refueling property you placed in service. For more information, see Form 8911.

4.  Alternative motor vehicle credit (Form 8910). This credit consists of the following credits for certain vehicles you placed in service. For more information, see Form 8910.

• Qualified fuel cell motor vehicle credit.
  
• Advanced lean burn technology motor vehicle credit.
  
• Qualified hybrid motor vehicle credit.
  
• Qualified alternative fuel motor vehicle credit.
  
• Qualified plug-in electric drive motor vehicle conversion credit.
  

5.  Bio diesel and renewable diesel fuels credit (Form 8864). This credit applies to certain fuel sold or used in your business. For more information, see Form 8864.

6.  Carbon dioxide sequestration credit (Form 8933). This credit is for carbon dioxide which is captured at a qualified facility and disposed of in a secure geological storage or used in a qualified enhanced oil or natural gas recovery project. For more information, see Form 8933.

7.  Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846). This credit is generally equal to your (employer's) portion of social security and Medicare taxes paid on tips received by employees of your food and beverage establishment where tipping is customary. The credit applies regardless of whether the food is consumed on or off your business premises. For more information, see Form 8846.

8.  Credit for employer differential wage payments (Form 8932). This credit provides certain small businesses with an incentive to continue to pay wages to an employee performing services on active duty in the uniformed services of the United States for a period of more than 30 days. For more information, see Form 8932.

9.  Credit for employer-provided childcare facilities and services (Form 8882). This credit applies to the qualified expenses you paid for employee childcare and qualified expenses you paid for childcare resource and referral services. For more information, see Form 8882.

10.  Credit for increasing research activities (Form 6765). This credit is designed to encourage businesses to increase the amounts they spend on research and experimental activities, including energy research. For more information, see Form 6765.

11.  Credit for small employer health insurance premiums (Form 8941). This credit applies to the cost of certain health insurance coverage you provide to certain employees. For more information, see Form 8941.

12.  Credit for small employer pension plan startup costs (Form 8881). This credit applies to pension plan startup costs of a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. For more information, see Publication 560, Retirement Plans for Small Business (SEP, Simple, and Qualified Plans).

13.  Disabled access credit (Form 8826). This credit is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons who have disabilities. You must pay or incur the expenses to enable your business to comply with the Americans with Disabilities Act of 1990. For more information, see Form 8826.

14.  Distilled spirits credit (Form 8906). This credit is available to distillers and importers of distilled spirits and eligible wholesalers of distilled spirits. For more information, see Form 8906.

15.  Empowerment zone and renewal community employment credit (Form 8844). You may qualify for this credit if you have employees and are engaged in a business in an empowerment zone for which the credit is available. For more information, see Form 8844.

16.  Energy efficient appliance credit (Form 8909). This credit is available for manufacturers of eligible appliances. For more information, see Form 8909.

17.  Energy efficient home credit (Form 8908). This credit is available for eligible contractors of certain homes sold for use as a residence. For more information, see Form 8908.

18.  Indian employment credit (Form 8845). This credit applies to qualified wages and health insurance costs you paid or incurred for qualified employees. For more information, see Form 8845.

19.  Investment credit (Form 3468). The investment credit is the total of the following credits. For more information, see Form 3468.

• Rehabilitation credit.
• Energy credit.
• Qualifying advanced coal project credit.
• Qualifying gasification project credit.
• Qualifying advanced energy project credit.
• Qualifying therapeutic discovery project credit.

20.  Low sulfur diesel fuel production credit (Form 8896). This credit is for the production of low sulfur diesel fuel by a qualified small business. For more information, see Form 8896.

21.  Low-income housing credit (Form 8586). This credit generally applies to each new qualified low-income building placed in service after 1986. For more information, see Form 8586.

22.  Mine rescue team training credit (Form 8923). This credit applies to training program costs you pay or incur for certain mine rescue team employees. For more information, see Form 8923.

23.  New hire retention credit (Form 5884-B). This credit may apply if you hired an employee after February 3, 2010, and before January 1, 2011, and the employee works for you for at least 52 consecutive weeks. For more information, see Form 5884-B.

24.  New markets credit (Form 8874). This credit is for qualified equity investments made in qualified community development entities. For more information, see Form 8874.

25.  Nonconventional source fuel credit (Form 8907). This credit is for qualified coke and coke gas you produced and sold to an unrelated person during the tax year. For more information, see Form 8907.

26.  Orphan drug credit (Form 8820). This credit applies to qualified expenses incurred in testing certain drugs for rare diseases and conditions. For more information, see Form 8820.

27.   Qualified plug-in electric drive motor vehicle credit (Form 8936). This credit is for new qualified plug-in electric drive motor vehicles placed in service during the tax year. For more information, including information on what is considered as a qualified plug-in electric drive motor vehicle, see Form 8936.

28.  Qualified plug-in electric vehicle credit (Form 8834, Part I only). This portion of the credit is for certain qualified plug-in electric vehicles. See Form 8834 for more information, including information on what is considered as a qualified plug-in electric vehicle.

29.  Qualified railroad track maintenance credit (Form 8900). This credit applies with respect to qualified railroad track maintenance expenditures paid or incurred during the tax year. For more information, see Form 8900.

30.  Renewable electricity, refined coal, and Indian coal production credit (Form 8835). This credit is for the sale of electricity, refined coal, or Indian coal produced in the United States or U.S. possessions from qualified energy resources at a qualified facility. For more information, see Form 8835.

31.  Work opportunity credit (Form 5884). This credit provides businesses with an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. For more information, see Form 5884.

The above list is 31 ways to legally pad your small business tax return.  The U.S. Gov has explained in black and white what is important to them.  When you align a certain number of your goals with their goals, they will reward you handsomely, by providing you with the opportunity (in most cases) to subtract the credits directly from your tax.