Tax Tips
Tax Tips
FOR HOMEOWNERS
ABOUT TAX PLANNING
FOR SMALL BUSINESS
FOR SELF PREPARERS
FOR FAMILIES
ABOUT EDUCATION
ABOUT THE IRS
ABOUT FILING EXTENSIONS
FOR HOMEOWNERS
- Mortgage interest is usually your biggest tax deduction.
- In most cases, you can deduct the points you paid on your loan.
- Second mortgage & home equity lines of credit can be deductible.
- Re-financing costs can be deductible.
- Property taxes are typically deductible.
- There can be tax free capital gains on the sale of a home.
- Be aware of the Mortgage Interest Credit.
- Exclude up to $500,000 of gain from taxes when you sell your house.
ABOUT TAX PLANNING
- If your medical expenses are close to the AGI limit (7.5%), consider having additional treatments & services within the same calendar year. Tax Preparation and Planning requires intimate knowledge.
- Consider paying your January mortgage payment in December.
- Make donations prior to January 1st.
- Consider paying your property tax bill prior to January 1st.
- Plan for the alternative minimum tax.
- Maximize contributions to 401(k) and 403(b).
- You have until April 15 to make an IRA contribution.
FOR SMALL BUSINESS
- Unlike personal income, business income is not taxed – only the profit on a business is subject to taxes.
- The Self-Employment Tax is independent of profit.
- Keep all your receipts.
- Deducting your home office and associated expenses provides excellent tax breaks.
- Turn non-deductible vacation expenses into deductible business travel.
- You must set up most retirement plans by December 31 in order to get a tax deduction for the current year.
- Hire your kids and save on taxes.
- You can deduct up to $100,000 of capital equipment costs ranging from computers to certain sport utility vehicles.
FOR SELF PREPARERS
- Make sure you check your math.
- Make sure you understand how the tax law changes apply to you.
- Make sure you are using the correct tax forms.
- Make sure you sign your return.
- Make sure you use last years return as a starting point.
- Make sure you choose the optimum filing status.
- Form 1040EZ may be easy but the long form 1040 may cut your tax bill.
- Using the incorrect tax table can cost you money or trigger an audit.
- Missing valuable deductions such as 50% of self employment tax can cost you money.
- Make sure you calculate the minimum alternative tax.
- Avoid math errors and unwelcome letters from the IRS by using tax software to prepare your taxes instead of by hand.
FOR FAMILIES
- The Child Care Credit can cut $2,100 from your tax bill.
- Take up to $10,000 off your taxes by adopting a child.
- Take advantage of the Kiddie Tax Rules.
- Setting up a ROTH IRA for your children creates another deduction.
- Consider the advantages of a living trust.
- Enroll in Child Care Reimbursement Plans at work.
- Child tax credit increased to $1,000 per child.
- Students should check with parents before claiming an exemption deduction on their own tax return.
- Make sure you get a social security number for each of your children.
ABOUT EDUCATION
- Get up to $5,250 of employer sponsored tuition reimbursement deductions.
- Beware that some scholarships and grants are taxable. Know the difference.
- Take a deduction for tuition and fees even if you don’t itemize.
- Eligible teachers get a deduction for classroom expenses.
- If you don’t qualify for the Hope or Lifetime Learning Credit — then consider a tuition and fee deduction
ABOUT THE IRS
- Answer any IRS correspondence immediately.
- Keep copies of everything you send and receive from the IRS.
- Keep prior year tax returns and records for at least 7 years from the due date of the return or date you filed, whichever is later.
- Keep good records that substantiate your income and deductions — this may save you from paying additional taxes, interest or penalties.
ABOUT FILING EXTENSIONS
- You can get an automatic four month extension of time to file your federal return by filing Form 4868 on or before April 15th.
- If you need more time — you can apply for an additional two month extension of time to file by filing Form 2688 on or before August 15th.
- It is possible to get an extension of time for payment of tax by filing Form 1127 — but you must be able to show that immediate payment would cause severe loss and undo hardship. Note: Legal requirements are strict.
- An extension of time to file is not an extension of time to pay. Pay your tax by April 15th and avoid further penalties and interest.