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Looking for the Largest Deduction

Wednesday, April 2, 2014

by The Hat Team

IRS allows taxpayers the option to take the standard deduction or the itemized deduction. The astute taxpayer will compare to see which one will result in the greatest deduction and the election can be made each year.

deductions The 2013 standard deduction for a married couple filing jointly is $12,200 and $6,100 for a single taxpayer. It doesn’t require any proof of actual expense and has no requirement for home ownership.

Items that can be included on Schedule A for itemized deductions include:

Certain taxes paid for state and local income tax, general sales tax, real estate property taxes, personal property taxes or other taxes paid
Qualified home mortgage interest, investment interest or possibly, mortgage insurance premiums
Charitable contributions
Casualty or theft losses
Medical and dental expenses that exceed 7.5% of adjusted gross income if born before 1/2/49 or 10% if born after 1/2/49
Job expenses and other miscellaneous deductions that exceed 2% of adjusted gross income

A non-homeowner taxpayer who has been taking the standard deduction needs to consider that it isn’t just the ability to deduct the mortgage interest and property taxes.

While the standard deduction might be the obvious choice for a non-homeowner, the combination of the mortgage interest and the property taxes plus other allowable deductions not recognized previously such as charitable contributions, now makes taking the itemized deductions significantly more advantageous.

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2013 Tax Deductions You Don't Want To Miss

Friday, March 14, 2014

by The Hat Team

If you moved to your Montgomery AL home in 2013 now is the time to anticipate itemizing deductions on your tax return. Take yourself to a quiet corner of your home and begin to plan for tax time in April. Here’s a partial checklist of some often overlooked deductions:

Mortgage Points: Most homeowners know that mortgage interest is deductible, but often forget that points are, too? Points are actually prepaid interest and may be deductible as mortgage interest if you itemize deductions on Form 1040, Schedule A.

Moving expenses: If you moved more than 50 miles for a new job, expenses such as movers, renting a truck, storing and insuring furniture, connecting/disconnecting utilities, and the cost of lodging while moving can be claimed as deductible expenses. Refer to IRS Pub. 521.

Job hunting costs: When looking for a position in the same line of work you held previously, you can deduct expenses associated with trying to land a new position including out-of-town lodging, transportation, employment agency fees, business cards, and resume printing costs.

The standard deduction: If you turned 65 last year remember you are now eligible for a larger deduction.

Medicare insurance and long-term care premiums: Medical expenses over 10% of Adjusted Gross Income are deductible. Remember to include the cost of Medicare Parts B, C, D, and supplemental insurance.

State sales tax: You still have a choice between deducting state income taxes paid or state sales taxes paid. Since you will choose whichever gives you the largest deduction, keep in mind the purchase of unusually large items like home building materials.

U.S. Armed Forces members, especially those serving in combat zones, face some special tax situations and are entitled to special tax benefits. Click here for specific details. Moving expenses listed above also apply to the military.

Early withdrawal penalty:Did you cash in a CD last year? If you were charged an early withdrawal fee, you can deduct it directly on your 1040. Financial Planning and Management Expenses, Schedule A. Be sure the fee is itemized on the Form 1099 from your bank.

Investment Advice: The costs of investment newsletters, paid financial advisors, or other fees spent to manage your money can be deducted.

Remember the above is a partial checklist for your convenience. For more details concerning deductions related to moving to your Montgomery home refer to www.irs.gov and/or consult a tax advisor.

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