SAVING MONEY ON YOUR TAXES

It is bad enough that you have to pay taxes, but you do not have to overpay them. Unfortunately some of us will overpay, just because we don’t understand the rules. I hope these tips will help you save money on your taxes.

I do not think this page will be a lot of help to my International readers, but I thought it was important enough to include for my readers in the U.S. Although, some of the others may at least find it interesting.

TWENTY TAX DEDUCTIONS YOU DO NOT WANT TO MISS!!!

MEDICAL EXPENSES

1. Travel costs for medical appointments. (Actual cost or_? cents per mile. Check with the IRS for actual cents per mile for the current year.)

2. Home improvements to accommodate a handicapped person.

3. Prescription birth control pills, any medicines and insulin.

4. Eye surgery, contact lenses, eyeglasses and hearing aids.

5. Medical insurance premiums.

6. Stop smoking programs.

TAXES

7. Estimated state and local taxes.

8. Real Estate taxes.

9. State and local property taxes.

HOME

10. Mortgage interest payments.

11. Loan points and origination fees.

CONTRIBUTIONS

12. Cash donated to religious, charitable or educational institutions. (Your weekly or monthly tithe to your church is included here.)

13. Fees or dues for religious, charitable or educational organizations or benefits. (Less the value received in return.)

14. Actual travel costs for religious, charitable or educational purposes or_? cents per mile. (Check with the IRS for actual cents per mile for the current year.)

15. Market value of items donated to charitable organizations. (Be sure to get a receipt.)

EMPLOYEE/BUSINESS EXPENSES

16. Trips for business (away from Home), gas, airplane tickets, meals, (keep receipts) etc. (If the Company fronts money or pays per deim, you cannot deduct.)

17. Business entertainment. (keep receipts)

18. Computer, cell phone, tools or uniforms if required for work.

19. Dues to unions or professional organizations.

20. Job search expenses in your current field. (If job found is in another location, then look into deductible expenses for your move.)

FAQ’S ABOUT TAXES

Now for some frequently asked questions. Unfortunately, this will be some dry reading. But, if you really want to save on your taxes, it will benefit you to do the reading.

Q- If you sell your home for more than you bought it for, can you avoid paying the capitol gains tax?

A- If you have lived in your home for the past two years, your deduction will be $250,000.00 (single) or $500,000.00 (married). You can take advantage of this deduction every two years. That is if you wish to move that often.

Q- You need a new car and have to have $20,000.00. How can you pay the least tax?

A- Don’t pull cash from your savings or IRA; cash in stocks and bonds that you have held for more than 12 months. The tax rate is much lower.

Q- If I have a Roth IRA, how can I withdraw money and not pay taxes?

A- When you contribute or roll money into a Roth IRA, the growth on the (money your investment makes) contribution cannot be withdrawn for five years. The principle can be withdrawn at anytime after age 59 1/2 without tax.

Q- How can I leave money to my heirs and avoid the Death Tax?

A- If you can avoid probate, your heirs will save legal fees, time and hassles, but not the Death Tax. Even though the Federal Government says it has repealed it, it still lives on. Right now you can leave approximately $1.5 million to heirs without any death tax. It will go up in increments until 2010. It is repealed for 2010, but comes back in 2011.

Q- How can I get Uncle Sam to help pay for my child’s college?

A- If you have an income of less than $65,000.00 and contribute to an Education IRA or buy U.S. Savings Bonds then Uncle Sam will help. (There are so many details for this question that it would take many pages to explain. Please check with a financial advisor or go online to the IRS. www.irs.gov. Look for Tax Benefits for Education.)

Q- Are Nursing Home costs fully deductible?

A- Only if the patient is "chronically ill". This means a Doctor, Nurse or Social Worker has certified that the patient is unable to perform at least two activities of daily living (eating, dressing, toileting, bathing) without assistance. Or that the patient requires supervision due to a severe cognitive impairment such as Alzheimer’s disease. Costs are deductible only as part of medical expenses that exceed 7.5% of adjusted gross income. (Check with the IRS each year to get actual percentage.)

Q- What is the maximum money amount that I can give to one person and not have to file a federal gift tax return?

A- You can give away $11,000.00 per person per year. In addition you can give away $1 million ($2 million if married) in a lifetime even to one person. For gifts over $11,000.00, you will have to file, but you won’t be taxed until the lifetime gifts exceed $1 million.

Q- If my parent decides to give me a gift, a large one, say $30,000.00. Do I have to claim it on my Federal Tax return?

A- Gifts, even large gifts are not income to the recipient and you do not have to pay income tax on them.

I hope I have helped at least some of you to save a bit of money on your taxes. Be sure you know the laws and always check with a financial consultant or the IRS to make sure everything is current, year after year. Laws do change and even though I am giving you the current laws, check to be sure.

If you are looking for a really good Income Tax program, try Turbo Tax. It really calculates everything.

Leave Taxes and Return to Penny Pinching