The Five Most Underrated Tax Breaks
By Tim Frye
When it comes to the IRS and their tactics of taxation, there will be no prisoners taken. They are willingly ready and apt to tax every dime of income, coming in from any avenue, at it’s appropriate rate. So this attitude must be reciprocated by the taxpayer if you are to ever save any real money on taxes, over time. It must become a battle between you, the tax preparer, the taxpayer, and the IRS, the taxor. And you must take pride in assisting you client in accessing all of the plethora of deductions available to them. Let us kindly remind you, the battle must a friendly and honest one, or you will draw too much attention to the taxpayer and have a situation where their pockets are battered to a pulp, and profusely at that. The only honest way to attain victory over the IRS is to pay as little tax as possible every year by staying diligent and knowledgeable of all deductions applicable to your client and their income. Missing these deductions, even in the slightest of formats, will leave you with higher taxable income, and subsequently a fatter tax bill. Lets run through a few of the most over-looked and underrated deductions.
For the taxpayer who is claiming dependents who are engulfed in their first four years of post-secondary education, the American Opportunity Credit should be available to them, provided the taxpayer’s income remains below the designated thresholds. This can be an easily ignored credit because the taxpayer may think that the benefit of this credit applies to the dependent’s tax bill and not theirs. IRS regulations state that any taxpayer claiming a dependent incurring school expenses that qualify for either of the education credits are allowed to claim the credit for themselves. The American Opportunity Credit offers a return of up to $2,500 of the first $10,000 of qualifying school expenses, so a failure to capitalize on this will be a costly mistake.
Mortgage Refinance Points
When you purchase a house, you are permitted to utilize the points paid on the loan as a deduction to overall income. People forget, however, that the IRS allows for a deduction from the points paid on a refinance too, as long at the revamped mortgage funds are used for the improvement of your personal residence.
Child Care Costs
It is relatively well known that taxpayers may receive a credit for paying child and dependent care costs for after school care. One of the overlooked aspects of this credit is that it can also be used for those pricey summer camp fees for your client’s kid, which are usually much higher than normal due to the expansive time requirements of the camps.
Job Search Expenses
With the economy still in a thorough state of stultification, this deduction can be a very pertinent and valuable one. Those ordinary and necessary expenses incurred in the process of gaining employment are indeed deductible. This fees can include cost incurred during resume completion, costs of interview suits, partial write off of internet bills, printing cost for business cards, etc. Remember to note that you can also write off the miles you drive, as long as they are directly related to the job search, at 55 cents a mile for 2013.
Charitable Deduction Mileage
When it comes to deductions, every cent counts. So even though you think you may have covered all angles when it comes to claiming charitable deductions, don’t be so sure. Did you know you can write off all mileage that is direct in its correlation to charitable activity? So if you are driving back and forth to charitable events frequently during the year, you should keep a mileage log and record the miles accurately and continuously. You get 14 cents for every mile you drive, which will add up.
When you sit down with your accountant, you can keep him on his toes by making sure he knows the ins and outs of the deductions available to you. If he isn’t knowledgeable and up to date in this area, you may want to switch tax preparers. When it comes to your client’s taxes, the five Ps are always relevant. Prior Preparation Prevents Poor Performance. And a poor performance while preparing their taxes year after year will without a doubt cost them an arm and a leg.