David Lerner Associates News: Complaints at Tax Time
About this time of year is when complaints about paying taxes often grow the loudest. One reason why is because many people are starting to gather all of their tax paperwork in preparation for the April 15 tax filing deadline.
This often makes many people aware of two things: First, how much time and work must go into preparing their tax returns. And second, how much money is deducted from their paychecks for local, state and federal income taxes.
In addition, Americans as a whole overpay their taxes by millions of dollars annually by failing to take advantage of perfectly legal and legitimate tax deductions, notes Martin Walcoe, executive vice president of sales development for David Lerner Associates. “While tax complaints are common at this time of year, many individuals can save themselves money at tax time by claiming deductions that they are entitled to take.”
Walcoe points out the following commonly overlooked tax deductions and credits that you might want to keep in mind as you prepare your tax return this year:
• Charitable contributions — You can deduct any gifts you made last year by check or payroll deduction to qualified Section 501©(3) organizations, as well as any out-of-pocket cash contributions you made if you kept the receipts. You should receive a statement from qualified charities you contributed to that details the amount of gifts you made in 2013. You can also deduct 14 cents per mile if you drove your vehicle for charitable purposes.
• Job-search expenses — To qualify for a deduction, your expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation.
You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you received in your gross income, up to the amount of your tax benefit in the earlier year.
You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.
If you travel to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area to which you travelled. You can only deduct the travel expenses if the trip is primarily to look for a new job. You cannot deduct your job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.
You cannot deduct job search expenses if you are looking for a job for the first time.
In order to be deductible, the amount that you spend for job search expenses, combined with other miscellaneous expenses, must exceed a certain threshold. To determine your deduction, use Schedule A, Itemized Deductions. Job search expenses are claimed as a miscellaneous itemized deduction. The amount of your miscellaneous deduction that exceeds two percent of your adjusted gross income is deductible.
• Sales taxes — The American Taxpayer Relief Act (ATRA) reinstated the ability to deduct sales taxes paid for 2013 tax returns. You can deduct sales taxes you paid last year, instead of state income taxes, if the amount of sales taxes you paid 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.
• Mortgage points — You can deduct the points paid on your mortgage if you bought a new home last year on your 2013 tax return. However, if you refinanced your mortgage last year, the points must be deducted over the life of the loan (for example, you can deduct 1/30 of the points this year on a 30-year mortgage).
• Child and dependent care tax credit — You may be able to claim this tax credit if you paid work-related expenses last year for the care of children who are under the age of 13. Up to $3,000 (for one qualifying child) or $6,000 (for two or more qualifying children) in total expenses may be used to calculate this credit.
• American Opportunity Tax Credit — This college tax credit replaced the Hope Credit and 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.
David Lerner Associates does not provide tax advice. Before following any strategies with potential tax implications, please consult your personal tax advisor, tax attorney, accountant or other qualified advisor.
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. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered 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 Call 1-800-367-3000 Visit our website: http://www.davidlerner.com