Finally Make This The Year You Find Professional Help

Unless you’re a bookkeeper, that’s not your main business.  Get out of the business of bookkeeping.  Hire it out, and use that time to be more productive in your own line of work. Consult an accounting and tax professional. People have this perception that having an actual accounting and tax professional do your taxes costs tons of money but the reality is that the money invested in consulting a professional could bring great rewards. Tax and accounting professionals will provide you information on areas that you were close to qualifying for in terms of credits and deductions, or help you with a plan for the future in order to take advantage of exemptions and deductions.

Contribute To Your IRA Or 401K

Contribute to your IRA or 401k for the following reasons: salary contributions aren’t taxed, contributions may generate a tax credit, employer contributions aren’t current income, borrowing from your retirement account lets you tap funds without tax, and distributions are exempt from the NII (net investment income tax) for purposes of the 3.8% additional Medicare tax on net investment income.

Stop By Any Store And Pick Up A Little Notebook For Your Car

Most people who deduct mileage against their taxes for business and medical purposes do not do it properly. The IRS requires “contemporaneous” notes regarding your mileage.  The old method of “what was my odometer on Jan 1 and Dec 31” isn’t going to work.  In taking deductions for mileage you must answer the following for the IRS:

  • Who you went to see,

  • What you saw them for,

  • When you went,

  • Where you went,

  • Why you went,

  • and How you got there (and how many miles it was).

Charitable Contributions

Charitable Contributions not only make you feel great but also are a great way to lower your tax bill.  Charitable contributions may sometimes be in appreciated stock or property, as long as you’ve owned the asset for more than a year.  In the case of appreciated stock or property, you can get a double tax benefit from the donation: You can deduct the property’s market value on the date of the gift and you avoid paying capital gains tax on the built-up appreciation.  By the way, the tax rate on dividends and capital gains increased to 20% from 15% for taxable incomes over $450,000 ($400,000 for single filers).

Saver’s Credit

This credit is hardly ever used. Aside from awesome tax implications of putting some of your income into retirement savings and the possibility of getting employer match contributions, if you contribute to your retirement account you could get tax credits. Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed with a maximum saver’s credit of $1,000 for single taxpayers and $2,000 for married couples.

Lifetime Learning Credit

Lifetime Learning Credit which, unlike the American Opportunity Tax Credit, is not restricted to the first four years of education.  You don’t even need to have a college degree as your goal; you can qualify for this credit based on simply being interested in learning a new skill or developing new opportunity. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return.

Investments

If you own rental realty or other investments that necessitate using your vehicle for travel, you can deduct the costs at the same rate used for business driving. The deduction is taken on:

  • Schedule E if driving relates to rental property.

  • Schedule A if driving relates to other investments. In this case it is a miscellaneous itemized deduction, which is subject to the 2%-of-adjusted-gross-income floor.