Friday, January 30, 2015

The most missed tax deductions..

Hello everyone, hope you all had a wonderful week. Slowly we will transition from winter to spring in a few weeks. When I think of spring, I am always reminded of the beautiful flowers that bloom on the side of the freeway and the next thing that comes to my mind is taxes.
It always feels like we just did taxes, and now it is January/February and  we have to do it again. Usually my husband does  taxes for our household, but I keep reading about the things on which we can get a break. Most popular software tools for doing taxes for  year 2015 are Turbo Tax, H&R  Block and TAX ACT  .. If you are single and you have very simple tax to do I would recommend TAX ACT. If more complicated then Turbo tax has worked better for us. Have not tried H&R block so any reviews are welcome. If you are a Vanguard member then you get $20 off turbo tax Vanguard Turbo tax offer.
I have always thought all tax terms are very complicated , actually it is not , I will try to put down some basic points to make it simple.It is quiet possible that when you file taxes you might miss to include some of the deductions that could lower your tax bill or increase your refund.We all usually do it at the last minute and in a rush would forget few things, I would like to go over them so you can keep this as your checklist


*Tax break for nursing moms: This is the new tax break this year. In 2010 IRS declined this break. Now IRS has changed that rule due to the increased benefits seen on breast feeding. Breast feeding moms can spend up to $1000 on breast pump and other essential supplies, so this is a welcoming tax break. Check out here to know more IRS website info.

*Student Tax break: The lifetime learning credit may be as high as $2000 per eligible student. Individual tax payers who earn less than $52,000 or married couple who file jointly and make  $104,000 or less are eligible. Read here to know more Lifetime learning credit.

*Savers tax credit:  This is the tax credit for retirement plans such as 401(k)s and other retirement plan. For people with lower income qualify for higher credit up to $1000 for people filing as single and up to $2000 for people filing jointly. To qualify for this credit the income of the single filers must be $30,000 yearly, or $60,000 for those who file jointly. You must not be a student in that year or someones dependent to claim this tax break. Read here to know more Savers Tax Credit

*Sales Tax: You have the option of deducting sales taxes  off your federal income tax.  If you made big purchases like a car,  engagement ring etc you have to itemize it to take the deduction.

*Health insurance Premium: If  your  medical expenses exceeds 7.5% of your adjusted gross income then it can  be deducted. If you are self employed and you are 100% responsible for your own premium cost then it gets taken off your adjusted gross income than as a itemized deduction.

*Charitable gifts :Any money donated for charity can be itemized. It is always a good practice to save the receipts in case of an audit.

*Teachers tax credit: Teachers often pay from their own pocket fro some of the supplies. IRS appreciates it and lets teachers deduct $250 for materials. You can subtract this amount from your income.

*Child care credit: This is one credit available regardless of your income.If the annual income of a household is lesser you might get a higher break than a household with higher income.

*Looking for a job: If in the past year you were looking for a job and you had some expenses related to it then you can itemize those deductions. As usual it is a good practice to save all the receipts.

*Self-employed Social Security: If you are self employed then you will have to pay 15.3% of your income as Social Security tax. One good things is IRS lest you deduct 7.65% from your income while filing taxes.

In general a household with annual income of $50,000 to $60,000 will get more deductions. Higher the tax bracket lower will be the deductions. The whole idea is to make sure you go through all these points and make sure you file it correctly. Have a wonderful weekend.

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