Want to Owe Less?
I don’t know about you, but every year around this time as I gather all my personal information, expenses, tax info, etc. together, I wonder, “How much am I going to owe?” and “Is there anything else I have forgotten that I have paperwork and can be written off?” Vicki Allen of Allen & Associates Inc., Tax and Bookkeeping in Smyrna, Tennessee, explains that while you may not have all of these deductions to write off, here are six of the most common deductions that you can use to lower your taxable income.
Most people know the best way to save for retirement is to contribute to an IRA. This is also one of the best ways to lower your taxable income. Whether you contribute through your workplace or on your own, the government allows you to deduct up to $5,500 or $6,500 if you are 50 years old or older. You can double those amounts if you and your spouse both contribute.
The tax experts at Allen & Associates also explain that if you want to start an IRA or if you have not yet reached the maximum you can deduct on taxes, as long as you make your contribution by April 15th, 2015, you can say it is for 2014. Note...don’t forget to tell your IRA administrator that the contribution you are making is for last year.
And speaking of investing in your future, did you have any investments last year that you lost money on? You can deduct up to $3,000 of the loss against your regular income if your losses outweighed your gains.
The third common deduction to help your bottom line is un-reimbursed employee business expenses. While you need to be able to produce the receipts for proof in case of an audit, these are great deductions. Also, are you in outside sales and do a ton of driving but don’t get reimbursed for your mileage? Keep track of your numbers and you can claim 56¢ per mile. That is huge! There is also your food and hotel room if you traveled overnight for business, entertainment expenses if you were schmoozing a client, cost of a briefcase, etc. Just remember to keep your receipts and be ready to hand them over when you come into Allen and Associates to have your taxes prepared.
Next up is non-cash charitable contributions. Did you do some Spring Cleaning last year and then donate your gently used clothing, household items, etc.? Guess what, it’s deductible. The best thing you can do to keep track of your donated items (rather than just sticking a random value on two bags of clothing) is to go to the TurboTax ItsDeductible program and individually enter your donated items. It will give you a value that the government accepts. And once again, get a receipt. Goodwill, as well as other places people commonly donate to, will gladly give you one if you ask. (While it is not required for smaller amounts, if your donation is valued at $250 or more, the government wants you to have a receipt.)
Real estate taxes are another common deduction. Most people know that the real estate taxes they pay on their primary residence are deductible. This can be thousands of dollars depending on where you live. But did you know that you can also deduct the taxes you pay on a second home (like your vacation beach house) or any other property you own, even if it is not built on. There is no limit to the number of properties; if you pay real estate taxes on it, write them off.
The last of the six common deductions you can take to lower your taxable income is your Health Savings Account contributions. (This is only if your medical expenses are not over 10% of your adjusted gross income or if your don’t itemize.) When done in conjunction with a high deductible health insurance plan, contributing up to $3,300 or $4,300 if you are 55 or older into personal Health Savings Plan up until the tax deadline (April 15th) will reduce your taxable income.
Obviously, there are many other deductible items that can lower your taxable income that we have not listed here. Just remember to save your receipts and keep track of your business related mileage if that applies to you. In the meantime, give Allen and Associates, Inc. a call or visit their website at www.aasmyrna.com. Make your appointment today and let their tax professionals help you find all the deductions you are entitled to.