Tax Planning Start Tax Planning Early: 8 Great Year-End Tax Tips Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by Ginita Wall Published Nov 8, 2013 3 min read When you think of the holiday season, what comes to mind? Gift exchanges? Holiday parties? Home-baked pies? Taxes? I know you have a lot of other things to do this time of year, but the holiday season is a great time to make some last-minute tax moves before the year is over. Here are eight of my favorites: 1. Ask for a New Year’s Bonus Instead of a Christmas Bonus By delaying your bonus by only a week, you can push the payment of taxes on the income 15 months into the future — a year from next April. 2. Clean Out Your Closets and Donate to Charity You can clean out the old clothes, sporting goods, books, and other household goods that you no longer use and welcome the New Year with new space in your life, and get a quick tax deduction to boot. Document these donations by making a list of the items at the time you donate them. You can use TurboTax It’s Deductible to accurately value your donated goods. 3. Pay Donations by Credit Card Payments made by credit card are deductible in the year they are charged, not the year they are paid, so you can donate to your favorite charity by December 31 and not pay the bill until next year. 4. Contribute the Maximum to Your 401(k) or 403(b) Retirement Plans Some employers will allow you to catch up on contributions by increasing your deduction on your last paychecks of the year. If you are 50 or over, don’t forget that you can contribute an additional $5,500 “catch-up” contribution in addition to the regular 401(k) or 403(b) $17,500 limit for 2013. 5. Check the Balance in Your Flexible Spending Account A wonderful fringe benefit, these helpful plans allow you to set aside a portion of your salary before taxes for certain purposes, such as child care or health care expenses. These plans did work on the “use it or lose it” concept: any amount unused at the end of the year was lost, however the Treasury and IRS modified the rule and now employees may be allowed to carry over $500 of unused amounts for next year’s expenses. Your employer may also offer the existing plan option to use unused amounts for up to two and half months following year end. 6. Bunch your Medical Bills Medical expenses are only deductible when they exceed 10% of your adjusted gross income (still 7.5% if you are over 65). If your income is low this year or your medical expenses are high, speed up your deductions accordingly. If you want to take the deductions this year, pay any outstanding medical bills before year-end, stock up on prescriptions, get new glasses, and pay your health insurance premiums before the end of the year. 7. Estimate Your Taxes You can use TurboTax TaxCaster to estimate your taxes and see if you need to make any last minute tax moves. The IRS treats income taxes withheld from your paycheck as if they were paid in equal amounts throughout the year. So if your calculations show you’ll owe money, you can increase the withholding on your last paychecks of the year to make up the difference. You can also try the new TurboTax MyTaxGuru to see what you can do to get a bigger tax refund when you file your taxes. 8. Don’t Forget to Gather Your Receipts You can deduct union dues, legal and professional fees relating to tax and investment advice, and unreimbursed employee business expenses of mileage, equipment, education, and supplies, among other things. If you pay a lot of expenses for your job or your investments, gather up the receipts and cancelled checks so you can save more money when you file your 2013 taxes. Previous Post Options for Taxpayers Who Can’t Pay Their Tax Liability Next Post Four Tax Tips for Armed Forces Personnel Written by Ginita Wall More from Ginita Wall 214 responses to “Start Tax Planning Early: 8 Great Year-End Tax Tips” Newer Comments » Hi Robert, Gifts to friends and family are not tax deductible Penalties on 529 plans are for withdrawals not used by the designated beneficiary for their qualified higher education expense. Reply I had a long term settlement check for 34,500 and I only got 24,500 after attorney fees.Can I deduct his fees for this on taxes. Reply Hi Tammy, If the income you received is taxable income, you can deduct the legal fees you paid to collect that income. The legal fees will be Miscellaneous Itemized Deduction subject to a reduction of 2% of your adjusted gross income. If your settlement is for unlawful discrimination (age or gender for example) the legal fees are deducted directly from the settlement amount. Mary Ellen If you do not have to pay tax on the income, the legal fees are not deductible. Mary Ellen Reply I volunteer 2 days a week at the Sheriffs Dept., about 7 hours each day. Is any of this tax deductible , such as mileage ? Reply Hi Joe, Yes, your mileage is deductible, and if you had to pay for a uniform or other supplies, you can deduct those as well. Mary Ellen Reply I volunteer twice a week a the Sheriffs Dept. , about 7 hrs a day. is any of this tax deductible such as my mileage ? Reply Is there a way to determine whether or not to take the standard deduction over itemized prior to spending the time it takes to enter all of the expense/deduction data into the program? As you know, a raw total of deductible expenses can be larger than the standard figure but less after the program applies all of the IRS’ fuzzy math to it. Reply Stu, There is no really simple calculation for itemizing deductions. If you know your approximate income amount you can decrease your medical expense by 10% of that amount, add the rest of your deductions and see if they are more than your standard deduction. 2013 Standard deduction is 6,100 if you are filing as single or married filing separately, 8,950 for Head of household, and 12,200 for married filing jointly and qualifying widow/widower. Mary Ellen Reply Hi Mary Ellen, Do you reply to posts selectively? Cause I asked a question before and never received a reply from you but people who asked questions much later got their replies. 🙂 I’d appreciate it if you could reply to my question as well. Thanks for your kind help. Reply Hi Amir, Thanks for asking. I am somewhat selective in the questions I answer. Some are too complex or too specific to answer in this forum. However, I did get to your question a short time ago. I hope you find the answer helpful. Mary Ellen Reply I had to install a stair lift this year so my wife could get up and down the stairs. Is the cost of that deductable? Reply Hi Herbert, When you make improvements to your house for medical purposes, you need a doctor’s prescription for the improvement to deduct the cost. The deduction is reduced by any increase in the fair market value of your house. The balance is a medical deduction which is further reduced by 10% of your adjusted gross income (7.5% if you or your spouse is 65 or older). Mary Ellen Reply If my wife and I bought a home with owner finance and no interest of finance charges just the down payment and monthly payments, can we deduct the money we spent on repairs, its a fixer u home. Reply Hi Glen, You cannot deduct expenses for acquiring, maintaining or improving your personal residence, except for interest and taxes. Mary Ellen Reply I read that you cannot claim fixing up your own house. We stuccoed and repainted the outside and inside. And we redid the bathroom. I just want to be sure before I bring in the receipts from the stores. my job requires me to buy many tools I have saved all my receipts and it adds up to almost 3000 will I get all that back on my taxes this year Reply Hi Tanya, If you itemize deductions on your tax return, you can include your tools expense as an employee business expense. You will not get a deduction for the entire $3,000. Your savings will be your tax rate times the amount you are able to deduct. Tax rates vary from 10% to almost 40% for 2013. Mary Ellen Mary Ellen Reply I have a question, I been paying to someone to take my son to his school, I wonder if I can file that on my tax as a child care or not?? Reply Hi Filbertha, I do not believe that will qualify as child care. Mary Ellen Reply Is there a way to determine if extra payments on my mortgage principal benefits me more than having the larger interest as a deductible on my tax return? Does it depend on the rate of interest I would get keeping the money invested (and paying interest on whatever the investment produces)? My mortgage int. is 4.75% and I owe $84,000. Reply Paying down your mortgage decreases the interest you pay since the extra payments are 100% principle, 0% interest. So it will actually increase your taxes. I would seriously consider just keeping the money invested. Reply Have union dues always been tax deductible? I have never claimed them before on Turbo Tax. Reply Yes. I was in a union at the Kennedy Space Center and always deducted my dues Reply Yes, they have always been deductible, and you typically get them all back. Reply Hi Sue, Union dues have been deductible as a miscellaneous itemized deduction for many years. Miscellaneous itemized deductions must be reduced by 2% of your adjusted gross income before they offer a tax benefit. Thank you, Mary Ellen Reply Question on medical payments, I pay my own premiums, high deductible, and am not yet 65. my husband and I are both retired and he is 66 and I, 62, very limited income, how does that work on my taxes? I had a lot of trouble last year and am not sure I did it right. Reply Hi Trish, If you are using TurboTax, you would enter your insurance premiums, deductibles and other out-of-pocked medical expenses in the Medical Expense portion of the Deductions section. TurboTax will take care of all the calculations from there. When one of the taxpayers of a couple are age 65 or older for 2013 taxes, you will still receive the 7.5% reduction instead of the new, higher reduction of 10% of AGI. Thank you, Mary Ellen Reply I am confused on medical I understand the 10%, but what are all the special forms and do you both have to be over 65, and what if you are paying your premiums and deductible, how does that work? Reply Hi Trish, Only one of you needs to be 65 or older to get the lower reduction. The only forms you need are 1040 and Schedule A. Thank you, Mary Ellen Reply I paid $2800 attorney fees to set up a Trust..Is that amount deductible??? Reply Hi Herbert, Setting up a trust is not a tax deductible expense. If there was tax planning involved, ask to attorney to bill that separately, and you can deduct that portion of the legal fees. Thank you, Mary Ellen Reply Question just submitted by about direct charitable contribution; I didn’t check the box under “submit”. before hitting submit button. Please respond. Reply Every year that I’ve had a Flexible Spending Account I’ve mailed in my receipts during the first wk of March to get the remaining balance from my account. It usually takes a wk to 10 days to get my refund. This yr I mailed it in as usual. After not receiving anything by the end of March I called the company through which my FSA is processed (WAGE WORKS). They told me they had not received any such request & therefore I had a zero balance & would not be receiving anything. This was extremely irritating to me to say the least. I talked to some higher up person & they told me the same thing, & then I went to an even higher person & again told the same thing. I even faxed it to them 2-3 times a wk for a month but still to no avail & with no response from the company. The $585 that was still in my account was never returned to me. I think the “uppers” that be decided to go have a “party” with all the remaining monies from my acct as well as anyone else’s. When did the Treasury & IRS change the “use it or lose it rule”? The gov’t keeps enough of my pyck as it is. I still want my $585 back. This yr I’ve decided to “bank” it myself each payday & earn interest on it. Has anyone else had this problem with their FSA company? Reply Hi Sunna, The IRS sets the rules for when you can submit expenses for reimbursement in Flexible Spending Accounts. You employer and WageWorks are only following the law. If you have proof that you submitted the claim before the deadline, you could try pursuing that angle. Thank you, Mary Ellen Reply RE: Instead of taking the Required Minimum Distribution on two 403b accounts (in annuities) in 1013, I’d like for the monies to be sent to a 401(c) charity. I’ve talked with the two companies; both said I will receive a “regular” 1099R. Listing the gift under “donations” will not give me the benefit of having the monies bypass me–as though I never received that RMD amount. Help. Reply Hi Hazel, The Qualified Charitable Distributions were only available for 2012. Your 403b companies gave you the correct information for 2013. Mary Ellen Reply I got divorced in February an my wife just left. I took 39 bags of clothes,shoes,toys,kitchenware,photoframes,games,i-pods,video-games,etc to Goodwill to get rid of the history and memories. I received signed invoices from Goodwill on each delivery.I figured the total amount of donation to about $30 000. With such a hugh amount of donation, will i attract attention to be audited? Reply yes keep your receipts so you have proof Reply Hi, For contributions over $5,000 of similar items like all the clothing, all the electronics, and all the furniture, you have to have a written appraisal. Your deduction is limited to the fair market value (or the amount the Goodwill will get when they sell the items). If you have the appropriate paperwork, you can take the deduction on Form 8283, then Schedule A of your 1040. Thank you, Mary Ellen Reply You can claim up to $500.00 in contributions without an audit. Anything pass that amount will probably be an eye for audit purposes. Ask Goodwill staff to give you a receipt because your estimated total may not be the total of your items donated. I would just attach the outline receipt with my tax forms. Also, taking pictures would help if IRS want to see what you donated. Reply I purchased a Avalon Hybrid a couple months ago. Do we still get tax credits? Reply Hi Robert, The Hybrid credit expired at the end of 2011. Mary Ellen Reply Is student loan interest fully deductible? Reply Yes, you should get a tax form from your lender,a 1098, which will state how much interest you paid. It has to be more than $600. Reply Good morning Tony, Student loan interest is tax deductible as long as it is paid before the end of the year! There is a special section you fill out on the 1040. Reply Hi Tony, Student loan interest, up to $2,500, is deductible with some limitations. You cannot use the Married Filing Separately filing status, and there are income limitations (for a single individual, the phase out doesn’t start until income exceeds $60,000 (this amount increases each year). Mary Ellen Reply if your business was fined for having a truck on the road that did not pass an inspection can i deduct those fines as an expense? Reply Hi Jackie, Penalties and traffic fines are not deductible business expenses. Mary Ellen Reply I am retired. Do I have to file taxes? I was told by other retirees that I do not have to. Reply Hi JayPee,. Filing requirements are more income based than age based. For 2013, a taxpayer over the age of 64 with income of more than approximately $11,000 must file a return. Mary Ellen Reply I bought a vehicle with the alternative fuel, in West Virginia there is a alternative fuel vehicle (AFV) Tax Credit West Virginia Code 11-6D will I be able to get this deduction if i do my taxes for 2013 with the turbo tax, software or will i need to go to a CPA? Reply Hi DIana, TurboTax does not include the form for preparing the credit (Form AFTC-1). You can prepare the form yourself and enter the credit in TurboTax, but TurboTax will not calculate the credit for you. Mary Ellen Reply I have been using Turbo Tax and Its Deductible for several years now and it makes doing my own taxes a breeze…I enter tax deductions every couple of months and at the end of the year, they’re all there in one place…thanks for the site! Reply Does Turbo Tax have the ability to work with income from an LLC I am a member of? Reply Hi Tom, If you are a single member LLC, you can prepare the required Schedule C in TurboTax. You may need to prepare the LLC return for your state using TurboTax Small Business (not Home and Business). If you receive a K-1 from a multi-member LLC, you can report that income using TurboTax. If you need to prepare a return for the multi_member LLC, you will need TurboTax Small Business. Mary Ellen Reply Is it beneficial to get married at the end of the year or wait until after the new year? Reply It depends. My wife and I both paid higher taxes after getting married at the end of the year, so don’t assume that being married is better! Reply Hi Kathy, If you both take the standard deduction and personal exemption ($10,000 in 2013), you will pay slightly higher taxes if you are married. If you are both able to itemize deductions as single individuals, you may see a slight reduction in your taxes. Mary Ellen Reply I was told that if I get married this late in the year I can file married but desperate on next years taxes and still claim head of household since I wasn’t married for the 12 months. Is this true? Kathy, If you are married on December 31, and you live with your spouse any time during the last six months of the year, you cannot file as Head of Household. Mary Ellen When I got married both my husband and I changed our status from Single Zero to Married witholding at single higher rate – that year we wound up owing over 7K in taxes. I would recommend not changing your status until you do the appropriate worksheets. Reply What if you pay taxed on gas and all other taxables like. Gas for the car and shopping and buying pre-made food. And any other stuff that is taxable. Reply Hi Dave, Sales taxes are deductible if they are greater than your state income taxes. Pre-made food, even if it is a special diet prescribed by a doctor, is not deductible. Mary Ellen Reply What if your state has no income taxes? Is any amount of sales taxes deductible? Vilma, You can use the tables provided by the IRS or your own records to determine the amount of sales tax you paid during the year. There is no limit on the amount you can deduct Very useful article – has inspired me to go donate more 🙂 Time to go through the closet Reply Dental work for my child would be deductible ? Reply Hi Maria, Dental and other medical expenses paid for your dependents are deductible. Mary Ellen Reply My question is my son is going through getting braces and we pay $153.00/month is this deductible? Also what about having teeth pulled? Hi I bought a house from a builder and they paid part of the closing costs as an incentive. Is it like only the part I paid directly is deductible or the whole amount for closing costs is tax deductible even if paid by the builder? Thanks, Reply Only the part you pay is deductible, unless you pay it via your mortgage over time. Reply Hi Amir, Closing costs for purchasing a home are not deductible with the exception of points paid for the loan and property taxes prorated to you for the period between purchase date and the next assessment date. Amounts of taxes being held in an impound account are not deductible. The rules are different if the house was purchased for rental or business. You do not need to consider how much the seller paid on your behalf when determining your deductions. Mary Ellen Reply My wife had to take a job that is away from home. It is a two hour drive, thus too far to commute. We had to rent an apartment for her to stay in during the week, and then on weekends she comes home. Would any of these expenses, rent, utilities, driving, etc. count as business deductions? Reply Jim, Commuting expenses and the apartment expenses are not deductible, even though it is a two hour commute. Mary Ellen Reply I have a couple of questions. 1. Am I allowed to deduct for miles and expenses for looking for a new job? 2. Am I allowed to deducted mandatory union fees? Reply Hi Melissa, Job hunting expenses and union dues are miscellaneous itemized deductions on Schedule A. Mary Ellen Reply I work as a consultant and work from home so I have a lot of little office expenses I’ve racked up (notebooks, computer mouse, folders, etc.) so do I need the receipts from every single one of those? I have kept track of the amount of each purchase, and saved the receipts for the bigger items, but not all small items. Reply Hi Kristin, You should keep receipts for all of your business expenses. You need to be able to prove that you paid for something (credit card slip or cancelled checks) and what that something was (receipt) in an audit. Mary Ellen Reply I just retired and am paying for my medicare and a medicare supplement plus Part D for prescriptions. How are these handled when filling out my tax return. Does it reduce the taxable income or are they considered medical deductions? Reply Hi Gary Your insurance premiums for Medicare and supplement are considered medical expenses and are deducted as part of your itemized deductions on Schedule A. Mary Ellen Reply Thank you, Turbo Tax! I appreciate this information now before I get crazy in late December! Reply I have made charitable donations through Western Union of over $10,000. Is this deductable? If so, what percentage? Reply Charitable deductions should be deductible however you paid they, but you do want some sort of records that document what you gave! Reply not sure if 1 & 3 are “good” advice…. “delay your payment of taxes this year for next year” eventually you have to pay it. Reply Thanks Reply I would like to know if the annual expenses paid to get an account open with a stock broker or the annual credit card fee is tax deductible. Reply Hi Mark, You broker fees are deductible a miscellaneous itemized deductions. Credit card fees are not generally deductible, however, if the card is used exclusively for business by a self-employed individual, the fee can be deducted on Schedule C. If you use the card for both business and personal expenses, you can prorate the expense, but I would recommend not deducting it at all in that situation. Reply YOUR STOCK BROKER FEES ARE DEDUCTIBLE BUT CREDIT CARD FEES ARE NOT. THE ONLY INTEREST OR FEES THAT ARE DECARE ONES CONNECTED TO A MORTGAGE OR 2ND MOTGAGE. Reply This is not completely true. Interest associated with investments is deductible as an investment expense. Margin interest is an example, but it is also true for credit card advances that you invest. What are the parameters for deducting expenses for a lease vehicle for business purposes? Reply Hi Stan, Vehicle expenses, whether a lease or a purchased vehicle, require you to log your miles, and prorate your expenses based on business vs. personal miles. Commuting from home to work is considered personal miles. Lease payments have a “lease inclusion amount” that reduces the amount of deduction. Employees would deduct this expense using form 2106, and it will go on Schedule A, Miscellaneous Itemized Deductions. You can find more information about deducting vehicle expenses at IRS.gov, in publication 463. Thank you, Mary Ellen Reply Is sales tax on autos deductable on income taxes? I made a mistake on buying one car and tradeed back with in three days on another car. Both were new cars. I live in Fla. Reply Hi Ronald, According to the IRS website – “The deduction is limited to the taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.” Reply Is sales tax on autos deductable on income taxes? I made a mistake on buying one car and tradeed back with in three days on another car. Both were new cars. Reply Is vehicle registration considered a deductible? Reply The tax portion of the fee, based on the value of the vehicle is deductible. Only some states have a deductible tax – Alabama, Arizona, Arkansas, California, Colorado, Georgia, Iowa, Indiana, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, South Carolina, Washington and Wyoming. Mary Ellen Reply will i be able to withdraw direct charitable contributions from my IRA for tax year 2014 in 2014 and not count it as income? Reply In other words, will that provision be extended for 2014? or will it expire at the end of 2013? Reply It expires end of 2013 Hi Carol, The provision to make a direct charitable contribution from your IRA and exclude the withdrawal from income is expiring at the end of 2013. Mary Ellen Reply Will the direct qualified charitable contribution be included in Turbo Tax for 2013? this was asked earlier when you said it expired in 2012. I’d like to know if this will be obvious when using Turbo Tax. I have used turbo tax for past several years. Last month I had credit fraud on 2 credit cards, which both companies took care of it. My question how can I make sure my info with turbo tax hasn’t been taken? Couldn’t find any phone number to call you Reply Are Gifts to grand children deductable? Are withdraws from educational 529 accounts still pentalized if you are 76 years old? Reply Gifts to friends and family are not deductible. 529 accounts have withdrawal penalties if the funds are not used for eligible higher education expenses by the beneficiary. Reply My wife and I volunteered to chaperone 25 youth to Germany this past summer. The organization is a 501c. Is any of the airline fare deductible as charity as we were not reimbursed for those fares? Reply Hi Robert, Your out-of-pocket expenses ncluding airfare that were not reimbursed, is deductible as a charitable contribution. Be sure to get a letter from the charity acknowledging your participation in their program. Mary Ellen Reply Is commuting to and from work mileage considered an unreimbursed employee business expense? I travel 52 miles one way to work. Reply Hi Ida, Commuting between home and work is not deductible. Mary Ellen Reply I. Love doing my own taxes! Reply Newer Comments » Leave a ReplyCancel reply Browse Related Articles Work Using Form 8829 to Write-Off Business Use of Your Home Tax Tips Roth 403(b) vs. Roth IRA: Which Should You Invest In? 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Hi Robert, Gifts to friends and family are not tax deductible Penalties on 529 plans are for withdrawals not used by the designated beneficiary for their qualified higher education expense. Reply
I had a long term settlement check for 34,500 and I only got 24,500 after attorney fees.Can I deduct his fees for this on taxes. Reply
Hi Tammy, If the income you received is taxable income, you can deduct the legal fees you paid to collect that income. The legal fees will be Miscellaneous Itemized Deduction subject to a reduction of 2% of your adjusted gross income. If your settlement is for unlawful discrimination (age or gender for example) the legal fees are deducted directly from the settlement amount. Mary Ellen If you do not have to pay tax on the income, the legal fees are not deductible. Mary Ellen Reply
I volunteer 2 days a week at the Sheriffs Dept., about 7 hours each day. Is any of this tax deductible , such as mileage ? Reply
Hi Joe, Yes, your mileage is deductible, and if you had to pay for a uniform or other supplies, you can deduct those as well. Mary Ellen Reply
I volunteer twice a week a the Sheriffs Dept. , about 7 hrs a day. is any of this tax deductible such as my mileage ? Reply
Is there a way to determine whether or not to take the standard deduction over itemized prior to spending the time it takes to enter all of the expense/deduction data into the program? As you know, a raw total of deductible expenses can be larger than the standard figure but less after the program applies all of the IRS’ fuzzy math to it. Reply
Stu, There is no really simple calculation for itemizing deductions. If you know your approximate income amount you can decrease your medical expense by 10% of that amount, add the rest of your deductions and see if they are more than your standard deduction. 2013 Standard deduction is 6,100 if you are filing as single or married filing separately, 8,950 for Head of household, and 12,200 for married filing jointly and qualifying widow/widower. Mary Ellen Reply
Hi Mary Ellen, Do you reply to posts selectively? Cause I asked a question before and never received a reply from you but people who asked questions much later got their replies. 🙂 I’d appreciate it if you could reply to my question as well. Thanks for your kind help. Reply
Hi Amir, Thanks for asking. I am somewhat selective in the questions I answer. Some are too complex or too specific to answer in this forum. However, I did get to your question a short time ago. I hope you find the answer helpful. Mary Ellen Reply
I had to install a stair lift this year so my wife could get up and down the stairs. Is the cost of that deductable? Reply
Hi Herbert, When you make improvements to your house for medical purposes, you need a doctor’s prescription for the improvement to deduct the cost. The deduction is reduced by any increase in the fair market value of your house. The balance is a medical deduction which is further reduced by 10% of your adjusted gross income (7.5% if you or your spouse is 65 or older). Mary Ellen Reply
If my wife and I bought a home with owner finance and no interest of finance charges just the down payment and monthly payments, can we deduct the money we spent on repairs, its a fixer u home. Reply
Hi Glen, You cannot deduct expenses for acquiring, maintaining or improving your personal residence, except for interest and taxes. Mary Ellen Reply
I read that you cannot claim fixing up your own house. We stuccoed and repainted the outside and inside. And we redid the bathroom. I just want to be sure before I bring in the receipts from the stores.
my job requires me to buy many tools I have saved all my receipts and it adds up to almost 3000 will I get all that back on my taxes this year Reply
Hi Tanya, If you itemize deductions on your tax return, you can include your tools expense as an employee business expense. You will not get a deduction for the entire $3,000. Your savings will be your tax rate times the amount you are able to deduct. Tax rates vary from 10% to almost 40% for 2013. Mary Ellen Mary Ellen Reply
I have a question, I been paying to someone to take my son to his school, I wonder if I can file that on my tax as a child care or not?? Reply
Is there a way to determine if extra payments on my mortgage principal benefits me more than having the larger interest as a deductible on my tax return? Does it depend on the rate of interest I would get keeping the money invested (and paying interest on whatever the investment produces)? My mortgage int. is 4.75% and I owe $84,000. Reply
Paying down your mortgage decreases the interest you pay since the extra payments are 100% principle, 0% interest. So it will actually increase your taxes. I would seriously consider just keeping the money invested. Reply
Hi Sue, Union dues have been deductible as a miscellaneous itemized deduction for many years. Miscellaneous itemized deductions must be reduced by 2% of your adjusted gross income before they offer a tax benefit. Thank you, Mary Ellen Reply
Question on medical payments, I pay my own premiums, high deductible, and am not yet 65. my husband and I are both retired and he is 66 and I, 62, very limited income, how does that work on my taxes? I had a lot of trouble last year and am not sure I did it right. Reply
Hi Trish, If you are using TurboTax, you would enter your insurance premiums, deductibles and other out-of-pocked medical expenses in the Medical Expense portion of the Deductions section. TurboTax will take care of all the calculations from there. When one of the taxpayers of a couple are age 65 or older for 2013 taxes, you will still receive the 7.5% reduction instead of the new, higher reduction of 10% of AGI. Thank you, Mary Ellen Reply
I am confused on medical I understand the 10%, but what are all the special forms and do you both have to be over 65, and what if you are paying your premiums and deductible, how does that work? Reply
Hi Trish, Only one of you needs to be 65 or older to get the lower reduction. The only forms you need are 1040 and Schedule A. Thank you, Mary Ellen Reply
Hi Herbert, Setting up a trust is not a tax deductible expense. If there was tax planning involved, ask to attorney to bill that separately, and you can deduct that portion of the legal fees. Thank you, Mary Ellen Reply
Question just submitted by about direct charitable contribution; I didn’t check the box under “submit”. before hitting submit button. Please respond. Reply
Every year that I’ve had a Flexible Spending Account I’ve mailed in my receipts during the first wk of March to get the remaining balance from my account. It usually takes a wk to 10 days to get my refund. This yr I mailed it in as usual. After not receiving anything by the end of March I called the company through which my FSA is processed (WAGE WORKS). They told me they had not received any such request & therefore I had a zero balance & would not be receiving anything. This was extremely irritating to me to say the least. I talked to some higher up person & they told me the same thing, & then I went to an even higher person & again told the same thing. I even faxed it to them 2-3 times a wk for a month but still to no avail & with no response from the company. The $585 that was still in my account was never returned to me. I think the “uppers” that be decided to go have a “party” with all the remaining monies from my acct as well as anyone else’s. When did the Treasury & IRS change the “use it or lose it rule”? The gov’t keeps enough of my pyck as it is. I still want my $585 back. This yr I’ve decided to “bank” it myself each payday & earn interest on it. Has anyone else had this problem with their FSA company? Reply
Hi Sunna, The IRS sets the rules for when you can submit expenses for reimbursement in Flexible Spending Accounts. You employer and WageWorks are only following the law. If you have proof that you submitted the claim before the deadline, you could try pursuing that angle. Thank you, Mary Ellen Reply
RE: Instead of taking the Required Minimum Distribution on two 403b accounts (in annuities) in 1013, I’d like for the monies to be sent to a 401(c) charity. I’ve talked with the two companies; both said I will receive a “regular” 1099R. Listing the gift under “donations” will not give me the benefit of having the monies bypass me–as though I never received that RMD amount. Help. Reply
Hi Hazel, The Qualified Charitable Distributions were only available for 2012. Your 403b companies gave you the correct information for 2013. Mary Ellen Reply
I got divorced in February an my wife just left. I took 39 bags of clothes,shoes,toys,kitchenware,photoframes,games,i-pods,video-games,etc to Goodwill to get rid of the history and memories. I received signed invoices from Goodwill on each delivery.I figured the total amount of donation to about $30 000. With such a hugh amount of donation, will i attract attention to be audited? Reply
Hi, For contributions over $5,000 of similar items like all the clothing, all the electronics, and all the furniture, you have to have a written appraisal. Your deduction is limited to the fair market value (or the amount the Goodwill will get when they sell the items). If you have the appropriate paperwork, you can take the deduction on Form 8283, then Schedule A of your 1040. Thank you, Mary Ellen Reply
You can claim up to $500.00 in contributions without an audit. Anything pass that amount will probably be an eye for audit purposes. Ask Goodwill staff to give you a receipt because your estimated total may not be the total of your items donated. I would just attach the outline receipt with my tax forms. Also, taking pictures would help if IRS want to see what you donated. Reply
Yes, you should get a tax form from your lender,a 1098, which will state how much interest you paid. It has to be more than $600. Reply
Good morning Tony, Student loan interest is tax deductible as long as it is paid before the end of the year! There is a special section you fill out on the 1040. Reply
Hi Tony, Student loan interest, up to $2,500, is deductible with some limitations. You cannot use the Married Filing Separately filing status, and there are income limitations (for a single individual, the phase out doesn’t start until income exceeds $60,000 (this amount increases each year). Mary Ellen Reply
if your business was fined for having a truck on the road that did not pass an inspection can i deduct those fines as an expense? Reply
Hi JayPee,. Filing requirements are more income based than age based. For 2013, a taxpayer over the age of 64 with income of more than approximately $11,000 must file a return. Mary Ellen Reply
I bought a vehicle with the alternative fuel, in West Virginia there is a alternative fuel vehicle (AFV) Tax Credit West Virginia Code 11-6D will I be able to get this deduction if i do my taxes for 2013 with the turbo tax, software or will i need to go to a CPA? Reply
Hi DIana, TurboTax does not include the form for preparing the credit (Form AFTC-1). You can prepare the form yourself and enter the credit in TurboTax, but TurboTax will not calculate the credit for you. Mary Ellen Reply
I have been using Turbo Tax and Its Deductible for several years now and it makes doing my own taxes a breeze…I enter tax deductions every couple of months and at the end of the year, they’re all there in one place…thanks for the site! Reply
Hi Tom, If you are a single member LLC, you can prepare the required Schedule C in TurboTax. You may need to prepare the LLC return for your state using TurboTax Small Business (not Home and Business). If you receive a K-1 from a multi-member LLC, you can report that income using TurboTax. If you need to prepare a return for the multi_member LLC, you will need TurboTax Small Business. Mary Ellen Reply
It depends. My wife and I both paid higher taxes after getting married at the end of the year, so don’t assume that being married is better! Reply
Hi Kathy, If you both take the standard deduction and personal exemption ($10,000 in 2013), you will pay slightly higher taxes if you are married. If you are both able to itemize deductions as single individuals, you may see a slight reduction in your taxes. Mary Ellen Reply
I was told that if I get married this late in the year I can file married but desperate on next years taxes and still claim head of household since I wasn’t married for the 12 months. Is this true?
Kathy, If you are married on December 31, and you live with your spouse any time during the last six months of the year, you cannot file as Head of Household. Mary Ellen
When I got married both my husband and I changed our status from Single Zero to Married witholding at single higher rate – that year we wound up owing over 7K in taxes. I would recommend not changing your status until you do the appropriate worksheets. Reply
What if you pay taxed on gas and all other taxables like. Gas for the car and shopping and buying pre-made food. And any other stuff that is taxable. Reply
Hi Dave, Sales taxes are deductible if they are greater than your state income taxes. Pre-made food, even if it is a special diet prescribed by a doctor, is not deductible. Mary Ellen Reply
Vilma, You can use the tables provided by the IRS or your own records to determine the amount of sales tax you paid during the year. There is no limit on the amount you can deduct
Hi Maria, Dental and other medical expenses paid for your dependents are deductible. Mary Ellen Reply
My question is my son is going through getting braces and we pay $153.00/month is this deductible? Also what about having teeth pulled?
Hi I bought a house from a builder and they paid part of the closing costs as an incentive. Is it like only the part I paid directly is deductible or the whole amount for closing costs is tax deductible even if paid by the builder? Thanks, Reply
Hi Amir, Closing costs for purchasing a home are not deductible with the exception of points paid for the loan and property taxes prorated to you for the period between purchase date and the next assessment date. Amounts of taxes being held in an impound account are not deductible. The rules are different if the house was purchased for rental or business. You do not need to consider how much the seller paid on your behalf when determining your deductions. Mary Ellen Reply
My wife had to take a job that is away from home. It is a two hour drive, thus too far to commute. We had to rent an apartment for her to stay in during the week, and then on weekends she comes home. Would any of these expenses, rent, utilities, driving, etc. count as business deductions? Reply
Jim, Commuting expenses and the apartment expenses are not deductible, even though it is a two hour commute. Mary Ellen Reply
I have a couple of questions. 1. Am I allowed to deduct for miles and expenses for looking for a new job? 2. Am I allowed to deducted mandatory union fees? Reply
Hi Melissa, Job hunting expenses and union dues are miscellaneous itemized deductions on Schedule A. Mary Ellen Reply
I work as a consultant and work from home so I have a lot of little office expenses I’ve racked up (notebooks, computer mouse, folders, etc.) so do I need the receipts from every single one of those? I have kept track of the amount of each purchase, and saved the receipts for the bigger items, but not all small items. Reply
Hi Kristin, You should keep receipts for all of your business expenses. You need to be able to prove that you paid for something (credit card slip or cancelled checks) and what that something was (receipt) in an audit. Mary Ellen Reply
I just retired and am paying for my medicare and a medicare supplement plus Part D for prescriptions. How are these handled when filling out my tax return. Does it reduce the taxable income or are they considered medical deductions? Reply
Hi Gary Your insurance premiums for Medicare and supplement are considered medical expenses and are deducted as part of your itemized deductions on Schedule A. Mary Ellen Reply
I have made charitable donations through Western Union of over $10,000. Is this deductable? If so, what percentage? Reply
Charitable deductions should be deductible however you paid they, but you do want some sort of records that document what you gave! Reply
not sure if 1 & 3 are “good” advice…. “delay your payment of taxes this year for next year” eventually you have to pay it. Reply
I would like to know if the annual expenses paid to get an account open with a stock broker or the annual credit card fee is tax deductible. Reply
Hi Mark, You broker fees are deductible a miscellaneous itemized deductions. Credit card fees are not generally deductible, however, if the card is used exclusively for business by a self-employed individual, the fee can be deducted on Schedule C. If you use the card for both business and personal expenses, you can prorate the expense, but I would recommend not deducting it at all in that situation. Reply
YOUR STOCK BROKER FEES ARE DEDUCTIBLE BUT CREDIT CARD FEES ARE NOT. THE ONLY INTEREST OR FEES THAT ARE DECARE ONES CONNECTED TO A MORTGAGE OR 2ND MOTGAGE. Reply
This is not completely true. Interest associated with investments is deductible as an investment expense. Margin interest is an example, but it is also true for credit card advances that you invest.
Hi Stan, Vehicle expenses, whether a lease or a purchased vehicle, require you to log your miles, and prorate your expenses based on business vs. personal miles. Commuting from home to work is considered personal miles. Lease payments have a “lease inclusion amount” that reduces the amount of deduction. Employees would deduct this expense using form 2106, and it will go on Schedule A, Miscellaneous Itemized Deductions. You can find more information about deducting vehicle expenses at IRS.gov, in publication 463. Thank you, Mary Ellen Reply
Is sales tax on autos deductable on income taxes? I made a mistake on buying one car and tradeed back with in three days on another car. Both were new cars. I live in Fla. Reply
Hi Ronald, According to the IRS website – “The deduction is limited to the taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.” Reply
Is sales tax on autos deductable on income taxes? I made a mistake on buying one car and tradeed back with in three days on another car. Both were new cars. Reply
The tax portion of the fee, based on the value of the vehicle is deductible. Only some states have a deductible tax – Alabama, Arizona, Arkansas, California, Colorado, Georgia, Iowa, Indiana, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, South Carolina, Washington and Wyoming. Mary Ellen Reply
will i be able to withdraw direct charitable contributions from my IRA for tax year 2014 in 2014 and not count it as income? Reply
In other words, will that provision be extended for 2014? or will it expire at the end of 2013? Reply
Hi Carol, The provision to make a direct charitable contribution from your IRA and exclude the withdrawal from income is expiring at the end of 2013. Mary Ellen Reply
Will the direct qualified charitable contribution be included in Turbo Tax for 2013? this was asked earlier when you said it expired in 2012. I’d like to know if this will be obvious when using Turbo Tax.
I have used turbo tax for past several years. Last month I had credit fraud on 2 credit cards, which both companies took care of it. My question how can I make sure my info with turbo tax hasn’t been taken? Couldn’t find any phone number to call you Reply
Are Gifts to grand children deductable? Are withdraws from educational 529 accounts still pentalized if you are 76 years old? Reply
Gifts to friends and family are not deductible. 529 accounts have withdrawal penalties if the funds are not used for eligible higher education expenses by the beneficiary. Reply
My wife and I volunteered to chaperone 25 youth to Germany this past summer. The organization is a 501c. Is any of the airline fare deductible as charity as we were not reimbursed for those fares? Reply
Hi Robert, Your out-of-pocket expenses ncluding airfare that were not reimbursed, is deductible as a charitable contribution. Be sure to get a letter from the charity acknowledging your participation in their program. Mary Ellen Reply
Is commuting to and from work mileage considered an unreimbursed employee business expense? I travel 52 miles one way to work. Reply