Tax filing tips egg-stravaganza
Sunday, April 08, 2012
I hope your kids had successful Easter egg hunts. After you finish making egg salad of the colorfully shelled collection, check out Today's Tax Tip special holiday edition: A dozen egg-cellent tax filing tidbits.
Photo courtesy Nestlé/Juicy Juice
1. You counted the payments you made to your regular day care provider toward the child and dependent care credit. But did you add in the costs of the day camp the kiddos attended last summer? It can be used toward this popular tax credit, too.
2. If you took advantage of low home loan rates to refinance your mortgage, don't forget about any points you paid. Just like when you buy a house and get to deduct the points paid on that loan, you can deduct re-fi points, too. The one difference is that in most home refinancing situations, you must deduct the points over the life of the loan instead of all at once.
3. The Earned Income Tax Credit, or EITC, is a tax break for folks who don't earn a lot. Because of the recession, a lot more folks fall into this category nowadays. If you were employed for only a part of 2011 or took a lower-paying job, check into whether you can claim the EITC. It's not just for taxpayers with kids, but it does pay more to families with children. The exact EITC amount you might be able to claim depends on your income, filing status and family size. And best of all, the EITC is a refundable credit, meaning you might be able to get some money back from the IRS.
4. Did you convert your traditional IRA to a Roth IRA in 2010? Then don't forget that you must pay half of the conversion tax due with your 2011 tax return. The other half is due with your 2012 tax return.
5. Taxpayers with disabilities are eligible for some tax breaks. If you're legally blind, you may be entitled to a higher standard deduction simply by checking a box on Form 1040. There's also the tax credit for the elderly or disabled. It's available to certain taxpayers who are 65 and older, as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability. The IRS has a roundup of tax benefits for disabled taxpayers.
6. Medical mileage could help cut your tax bill. To deduct any medical (and dental) costs, you must have more than 7.5 percent of your adjusted gross income. To overcome that Schedule A itemized tax deduction hurdle, there are lots of expenses you can count here, including the mileage to doctors' and dentists' offices, as well as to your pharmacy to pick up your prescriptions.
7. Take into account reinvested dividends which affect the basis of your assets. Basis is critical in figuring your profit (or loss) and any possible capital gains (or losses) that could affect your tax bill. For 2011, new 1099-B basis rules help some investors. But many people own mutual funds. If that's you and you forget to factor in reinvested dividends into your calculations, your basis numbers -- and tax liability -- could be wrong. It could, in fact, could cause you to pay double taxes on your mutual fund gains.
8. Attention, new graduates. You can deduct moving costs for your first job. This is one of those tax code quirks. While you can't write off first-job search expenses because that's allowed only for folks looking for another job in the same field, Uncle Sam will help pay for your move to take your first post-school work position. Even better, you can claim these costs without having to itemize.
9. Do you live in a state that collects income taxes. Don't forget to count them as an itemized deduction. And be sure to add in estimated tax payments you made to your state tax office. If your state doesn't have an income tax, then deduct your state and local sales taxes. The 2011 tax year might be the last one for which the sales tax break is available.
10. Self-employed business travelers need to pull out those airline baggage fee receipts. You can deduct those amounts as part of your deductible work-related travel expenses.
11. Mother Nature has been on a tear for the last couple of years. Here in Central Texas, we had almost 100 days of 100 degrees or higher temperatures in 2011. That meant a lot of folks made some relatively easy energy efficient home improvements -- storm windows, added insulation, new air conditioners -- to cut their utility costs that rose with the thermometers' mercury. Now they might be able to save some tax dollars at filing time, thanks to the Residential Energy Efficient Property Credit worth $500. And more involved energy upgrades, such as solar or geothermal systems, offer an even larger tax credit.
12. The Alternative Minimum Tax, or AMT, is a parallel tax system that has been catching more middle class taxpayers because the tax isn't automatically adjusted for inflation. If you had to pay the AMT in a prior tax year and you're free of its grasp for the 2011 filing season, you may be eligible to claim a minimum tax credit against your regular tax this year. IRS Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts, has details.
I hope these help as you finish up your 2011 tax return. They aren't as savory as chocolate bunnies and Peeps, or even the deviled eggs you made out of today's hunt gatherings, but they should help sate your tax saving appettite.
You also might find these items of interest:
Thanks for the tax filing tips. With the ever changing tax code it seems there is always something learn.
Posted by: Blue Tax | Tuesday, April 17, 2012 at 10:58 AM
Thanks for the compliment I am glad you like to the comments. I really.I wish u keep on giving these course with some new strategies and appreciate your work, keep it up.....
Posted by: accounting fort worth | Thursday, April 12, 2012 at 10:19 PM