Ten Big Tax Deductions

Posted by By at 21 March, at 07 : 22 AM Print

Charitable noncash contributions

 

Charity, as I hope everyone remembers, begins with a tax deduction. Now, let’s say you emptied your closets and gave everything to Goodwill or a similar charity. The value of your donated items — clothes, furniture, whatever — is deductible. Get a written receipt. With noncash charitable contributions, the rule is simple: No receipt means no deduction if you get audited. Clothes and household goods must be in good or better condition to get the deduction.

 

Points on refinancing

 

With interest rates remaining so low over the past few years, lots of homes have been refinanced, sometimes more than once. Any points you pay to refinance your home can be deducted on a monthly basis over the life of the new loan. So if you refinanced your mortgage on June 1, 2011, for a 20-year term, seven out of 240 months will have passed before Dec. 31, 2011. If you paid $2,400 in points, you can write off $70 ($10 a month for seven months) for 2011.

 

Old points on refinancing

 

This is one deduction lots of people miss. All unamortized points on an old refinancing are deducted in the year of a new refinancing. So let’s say you refinanced on June 1, 2010, and paid $2,400 in points. You refinanced again on June 1, 2011. You can deduct all the remaining points on the 2010 loan on your 2011 return. That’s $2,280 plus the $50 you could deduct for January through May 2011.

 

Health insurance premiums

 

Any health insurance premiums you pay, including some long-term-care premiums based on your age and Medicare premiums you pay, are potentially deductible. But you have to add these to your medical expense pot. Medical expenses have to exceed 7.5% of your adjusted gross income before they give you any tax benefit.

 

Educator expenses

 

If you’re a qualified educator, you can get an above-the-line deduction of as much as $250 for materials you bought in 2011. That includes books, supplies and even computer equipment. You qualify if you’re a kindergarten through grade 12 teacher, aide, instructor or principal. The best part? Since it’s an above-the-line deduction, you don’t have to itemize to get it.

 

Higher education expenses

 

If your adjusted gross income isn’t more than $65,000 ($130,000 on a joint return), you get an above-the-line deduction of as much as $4,000 for any higher-education expenses you paid. Congress has extended this 2009 tax break through 2011.

 

Energy Savings Home Improvement  Credit

 

Credits are good because they are a dollar-for-dollar reduction in tax. This had been a 30% credit for skylights, outside doors, windows, pigmented roofs, high-efficiency furnaces, water heaters and central air-conditioning units installed in your primary residence in 2009 and 2010. This credit for most improvements had been capped at $1,500, but that was $1,500 off the cost of the improvements — and you saved energy as well. For 2011, the credit was cut to 10%, up to $500 (reduced by any credit claimed since 2006), with a cap of $50 to $300 on fans, furnaces, water heaters, heat pumps and central air-conditioning, and a $200 cap on windows.

 

Investment and tax expenses

 

Many of us forget tax-planning and investment expenses because they fall under miscellaneous itemized expenses. Further, the total must exceed 2% of your adjusted gross income before you get any tax benefit.

 

Casualty deductions

 

2011 brought forest and range fires aplenty, as well as floods and huge snowstorms. If the president declared where you live to be a disaster area, you could claim your loss on either your 2011 or 2010 return. File Form 1040X (.pdf file) now for 2010 to get relief before April 2012, unless your marginal tax rates have gone up.

 

Retirement tax credit

 

The retirement tax credit is designed to give moderate- and low-income taxpayers an incentive to save for retirement. If you make a contribution to your retirement account, that money isn’t taxed currently. So it’s like you get a deduction off your income. In addition, you get a credit of as much as 50% of the first $2,000 invested. That’s as much as a $1,000 reduction in your tax.

Source: MSN Money
Photo by Pete Boyd

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This post was written by:
- who has written 352 posts for Rock The Capital
Eric J. Epstein is RocktheCapital‘s coordinator and a community advocate for good government for over 25 years. Mr. Epstein is also Chairman of the Three Mile Island Alert, Inc., a safe-energy organization founded in 1977; President of EFMR Monitoring Group, Inc., a non-profit economic development corporation established in 1977, and Chairman of the Stray Winds Area Neighbors (SWAN), a smart growth association organized in 2005. Mr. Epstein was a Visiting Assistant Professor of Humanities at PSU-Harrisburg (1992-1999) and co-authored the Dictionary of the Holocaust, which was released by Greenwood Press (1997) - Email Eric Epstein

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