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Tax Time Tips

April 6, 2011 by  
Filed under Lifestyle, MISC

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This year’s federal filing deadline has been moved to Monday, April 18th.  More about why later, let’s get to work on deductions!  We riffled through a few websites and came across a few items we hope you know about… or should be made aware of.

Refinancing points—  Any points you pay to refinance your home can be deducted on a monthly basis over the life of the new loan.  

Old refinancing points–  Unamortized points can be deducted in the year of a new refinancing.  And, if you can refinance a 2010 loan in 2011, you can write off the remaining balance in 2012.

Homebuyer Tax Credit—If you received the $7,500 repayable credit in 2008, you’re now liable for repayment at $500 per year.  The $8,000 first-time homebuyer credits of 2009 need no repayment.

Property Tax Deduction—You were able to claim $1,000 on top of the standard deduction for 2009, but not in 2010.  Congress let it expire.

rsz_tax_1Energy Savings Home Improvement Credit— You may be eligible for a 30% credit (maximum $1,500) for skylights, outside doors, windows, pigmented roofs, furnaces, water heaters or central air installed in your primary residence.  

Health insurance premiums—Self-Employed:  Deduct the full amount of your self-employed  health insurance premiums to the extent of your net income if the expense is included in your adjusted gross income. You can also deduct health insurance premiums when you calculate your self-employment Social Security and Medicare taxes.  Premiums paid after March 30, 2010 for kids up to age 27 are deductible.  On the other end, self-employed seniors age 65 and up can deduct Medicare premiums.  Employer Paid:  All health insurance premiums, including some long-term-care (depends on your age), can be deductible.  Add these to your medical expenses, and if they exceed 7.5% of your adjusted gross income, ka-ching! 

Tax expenses – You can include tax-planning and investment expenses but the total needs to exceed 2% of adjusted gross income.  Includes tax preparation fees, plus tax-planning legal or accounting fees.  The tax part of estate planning is deductible, too.   

Investment expenses —  Annual broker fees, directly paid IRA fees, even your security deposit box.  You can also deduct investment-related subscriptions such as Barron’s, Forbes, etc., and get receipts for your investment-related newsstand pickups, too.  Long-distance phone calls to your broker and investment adviser are deductible, so are parking fees and mileage when you visit them.

rsz_tax_2Charitable contributions—This is an auditing minefield, so keep good receipts. Pay by credit card and the deduction is taken on the year you made the charge, and not the charge card payment.  Don’t forget receipts for cash transactions, too.  If you donate through your company payroll, save your annual report.

Donated items— Items dropped in a donation box also bring on auditing risks because you don’t get a receipt.  Many feel more comfortable either dropping items off directly at the nonprofit, or having the nonprofit pick them up.  Most will give you a receipt where you fill in the amount.  If you’re not sure how to calculate value, ask the charity for a suggested amount.  Be fair about actual value.

Educator expenses– If you’re a K-12 teacher, aide, instructor or principal, you may be able to get an above-the-line deduction of up to $250 for materials such as books, supplies, or equipment. 

Higher education expenses—If you or your kids attend college, the American Opportunity Credit is worth up to $2,500 per undergraduate student.  A Lifetime Learning Credit is worth as much as $2,000 per return. Compare and see what’s best.  

Continuing Education courses:  You can’t deduct expenses to qualify for a new business or profession. However, you can deduct continuing-education courses taken to either maintain your business/professional license, or to enhance your  business-related skills. 

Business gifts and Greeting Cards:  Greeting cards to clients and prospects are a deductible advertising expense.  Gifts you purchase for clients are deductible but limited to $25 per person per year.  Companywide gifts are deductible in any amount, as long as it’s reasonable.

The April 18th filing deadline is thanks to Emancipation Day in Washington, DC.  This District of Columbia holiday, celebrated on April 15th this year, honors Abraham Lincoln’s freeing nearly 3,100 slaves nine months prior to his Emancipation Proclamation.  

These tips are meant to be guidelines only. Restrictions apply in some situations.  The IRS has a very comprehensive tax website, even an online filing system.  You can access their information through www.irs.gov , or toll free 800-829-1040, or consult your tax professional with any tax questions you may have.

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