Tag: deductions

4 Overlooked Tax Deductions That Yield Big Rewards

Tax time is upon us. While some people look forward to this time of year, many more dread it as they think about the amount of money that they may have to pay. It must be done, so let’s work at getting the most money back. After all, the IRS claims that millions overpay each year.

1. State Income Taxes
If you paid state taxes last year, then you are eligible to subtract them from your federal taxes this year. Make sure to know the exact amount that you paid in these taxes, so that your return is not delayed.

2. Job Search Expenses
Did you look for a new job in 2011? If so,  you are allowed to deduct up to 2 percent of your gross income for the expenses involved in a job search from this year’s taxes. To claim this deduction, you must not be looking for your first job, nor have any substantial break between your last job and the new one. The search must be for a job in the same occupation. If you pay an agency fee to help you in your search, then you can subtract that cost unless your new employer reimburses you for the cost. You can deduct cost for mailing and distributing your resume. If you travel, then the cost is deductible, as long as the primary reason for traveling was to look for a job.

3. Donations
We love those who give and so does the IRS, as long as you give to a qualified organization. If you get merchandise or a prize in exchange for your donation, then you can only donate the amount over the normal price of the merchandise. If you donate stock or real property, you can get a donation for the fair market value of those items. You must keep a record of the name of the organization, the date of the contribution and the amount of the donation. For amounts over $250, there are specific forms that you must file with the IRS. You can deduct the cost of travel to a volunteer position. You can also deduct any cost involved in your participation, such as uniforms. Don’t forget that you can also deduct your tithes and offerings to a religious organization.

4. Work
Many expenses can be deducted thanks to working. If you must have a cell phone for work, then the amount you pay for the cell phone above your normal usage is deductible. You can also deduct any dues paid to unions if you must belong to it in order to have your job. If you choose to belong to a professional organization, you can deduct those dues. You can also subtract the costs of any reading material that helps keeps you abreast on what is happening in your industry. If your job requires uniforms that would not be worn in the rest of your life, then you can subtract those costs.

Looks a little better, doesn’t it? Remembering to take each deduction that you can will help to lower your tax bill – so don’t be lazy!

Ashley Miller likes to write about finance, travel and Flowerdelivery.net.

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Rules for Charitable Contribution Deductions

Charitable contributions made to qualified organizations through the year may help reduce your tax bill.  Many organizations give donors pertinent details about their tax-deductible donation including the amount that can actually be reported on your tax return.  The following tips may help ensure donation made will be beneficial on your taxes.

  • Make sure you report charitable contributions on the correct form. The IRS states that form 1040 must be used to itemize deductions using Schedule A.
  • Upon reporting the deduction, make sure it was made to a qualifying charitable organization.  Contributions reported shouldn’t be donations made to individual or political organizations.
  • There are rules to review if your contribution included a vehicle.  Clothing and other goods should be fair market value and in good condition in order for it to deductible.
  • Items received for making a contribution such as ball game tickets or services; deduct the amount that exceeds fair market value.
  • When reporting cash contributions, make sure you have proper documentation that proves the amount.  This may include bank statements, a correspondence from the organization or even paystubs if donations were made via payroll deduction.  A phone bill will suffice for text donations as long as it states the name of the organization, date of donation and the amount given.
  • Donations of $250 or more must have proper documentation such as a bank record or written notice from the qualifying organization.  You may need to report if you were given anything in exchange such as any gifts or services. Noncash donations of $500 or more should be reported on IRS Form 8283 (Noncash Charitable Contributions) and attached to your tax return.
  • If you donation was an item that valued over $5,000 an appraisal is required.  Obtain an appraisal from a qualified appraiser and report data on the IRS Form 8283 section B.

Additional details can be reviewed in the IRS Publication 526: Charitable Contributions.  Information regarding property value can be review in IRS Publication 561: Determining the Value of Donated Property.  It is important to report contributions to the best of your knowledge with honesty.  The IRS may question donations made and contact you for proof.  If you are found to have provided false information on your federal income tax return, you may face penalties.  Contact a tax professional with questions or concerns about charitable contributions made.

Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to how to setup an umbrella company.

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