David Lerner Associates: Don't Overlook These Tax Deductions and Credits
Don’t look now, but tax time is right around the corner. Now is the time to start getting all your tax materials and paperwork in order so you won’t be scrambling the week before April 15.
As you do, keep in mind the fact that it’s estimated that U.S. citizens overpay their taxes by millions of dollars every year by overlooking common tax deductions. Still, more than $1 trillion in itemized deductions are taken by Americans each year, along with another $700 billion in standard deductions.
Here are a few of the most commonly overlooked tax deductions and credits. Keep this list in mind as you begin preparing to file your tax return this year:
• Sales tax— The ability to deduct sales taxes paid (instead of state income taxes) was reinstated for 2012 (retroactively) and 2013 tax returns by the American Taxpayer Relief Act. If you live in a state with a state income tax, you can deduct this or the sales taxes you paid last year, whichever amount is higher. IRS tables indicate how much to deduct based on your state, income, and state and local sales tax rates, but you can add sales tax paid on big-ticket items (like a new car or boat) to this amount.
• Charitable contributions— You should receive a statement from qualified Section 501©(3) organizations you gave money to detailing the amount of gifts made by check or payroll deduction. But you can also deduct any out-of-pocket cash contributions you made if you kept the receipts. And you can deduct 14 cents per mile, plus parking and tolls paid, for any driving you did for a charity.
• Job-search expenses— Job-hunting costs (so long as it’s not your first job) can be deducted as miscellaneous expenses if you itemize deductions on your tax return. These may include transportation expenses (55.5 cents per mile, as well as parking and tolls), food and lodging, employment agency fees, and printing costs for resumes and business cards. Note, however, that only total miscellaneous expenses that exceed two percent of your modified adjusted gross income (MAGI) are deductible.
• Mortgage points— If you bought a new home last year, you can deduct the points paid on your mortgage in full on your tax return this year. If you refinanced your mortgage, you have to deduct the points over the life of the loan (e.g., 1/30 of the points this year on a 30-year mortgage).
• American Opportunity Tax Credit— This college tax credit, which replaced the Hope Credit, applies to qualifying expenses incurred for up to four years of college. It applies to 100 percent of the first $2,000 spent on qualifying college expenses and 25 percent of the next $2,000, or a total of $2,500 per student, per year. The credit phases out for individuals with MAGI higher than $80,000, or married couples with MAGI higher than $160,000.
• Child care tax credit— You may qualify for a tax credit of between 20-35 percent of child care expenses incurred while you work for children who are under the age of 13.
• Alternative energy equipment— If you installed qualified residential alternative energy equipment in your home last year — like solar hot water heaters, geothermal heat pumps or wind turbines — you may be eligible for a tax credit to help cover their cost.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates,Inc. (DLA). This material does not constitute an offer or recommendation to buy or sell securities and should not be considering in connection with the purchase or sale of securities. Member FINRA & SIPC.
Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates 877 367 5960 http://www.davidlerner.com