(This is the second post in a two-part series. Click here to access part one, “5 Of The Most Commonly Missed Tax Deductions.”)
In case the first five tax deductions weren’t enough (and let’s face it, you can never have too many tax deductions!), here are five more deductions that can save you a lot of money come tax time.
1. Professional Fees and Classes Deductions. You may have already known that you can deduct certain office equipment, your home office supplies, and health insurance, but did you know that you can also deduct many of the other costs of having a job? Any professional fees that you pay to continue in your career are deductible on your tax return, as well as much of the costs of attending classes, seminars, and training sessions. Subscriptions to professional journals, newspapers, and books are also included as tax deductions. Finally, don’t forget any membership fees you pay to trade organisations, professional groups, or chambers of commerce! All of these things will earn you quite a large deduction on your tax return as long as you keep track of what you spend and save your receipts.
2. Charitable Non-Cash Contributions. Charitable contributions are the ultimate win-win situation. Giving to charity is good for the world and good for your wallet because the charity gets your money and you get your money back on a tax return. If you don’t have the money to make a donation this year, you can always charge the donation. Tax deductions are usually taken when the purchase is made, not when the charge is paid off so it will still apply for this year. Taking the deduction on a monetary contribution though isn’t too difficult, but remember, you can also take a deduction on almost anything donated to charity. Things like old clothes, used books, furniture that no longer fits the motif of your home, almost anything. The only qualification for the deduction is that for items like clothes and household goods, the items need to be in good or better shape. In the case of an audit, you must have the written receipt to get the deduction so be sure you get a receipt for all your donations before you leave.
3. Energy Savings Home Improvement Credit. If over the last year you built a new home, remodeled your current home, or replaced anything within your home, check out the IRS’s list of home improvement credits that are available to you. One main credit offered is for putting in new energy saving appliances, windows, doors, roofs, or basically anything that is identified as energy saving. The energy saving home improvement credit is particularly helpful because it allows for a dollar-for-dollar reduction in tax, although it does have a maximum limit of $1500. Still, if you spend less than that on the improvements, the credit cuts down the amount you’ll owe in April by more than the usual tax credit or deduction can.
4. Investment and Tax Expenses. One of the most easily forgotten tax deductions is for the money spent on investments and tax preparation. Drafted your will this year? Money spent on tax preparation when planning out your estate counts as a tax preparation fee and is deductible. In general, things like fees for planning out your taxes by a lawyer and/or an accountant qualify as tax preparation fees and are deductible, as well as the usual tax costs you have. Almost anything spent on investments counts too as a deduction in this category. Fees paid to your broker and IRA, subscriptions to investment magazines, long distance phone calls to your broker and/or investment advisors, even mileage to go see them all qualify as deductible investment expenses. The only restriction for this deduction is that the total of all these expenses must be greater than 2% of your adjusted gross income before the deduction can be used.
5. Retirement Tax Credit. This credit actually has two great benefits. First, any contributions in to your retirement account aren’t taxed as of now so it’s a great idea to get a jumpstart in building your retirement account while this lasts. Second, you get a credit on the first $2,000 you invest, resulting in a reduction on your taxes. Contributions to retirement accounts aren’t the only things that qualify here either. IRAs and Roth IRAs, Employee Pension plans, and 401k’s all qualify for the deduction when a contribution is made.
As the April 15th deadline creeps ever near, remember it’s never too early to start organising your taxes! Tax preparation can be difficult, even for the seasoned tax filer, but using this l
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