Tax time is quickly approaching and I'm sure many of you need all the help you can get. Check out this great information I recently found on USAA. Then, if you have questions about your mortgage, give me a call. I'm happy to help!!
Before tackling your tax return, brush up on this baker's dozen of deductions that could cut your tax bill.
1. Traditional IRA Contributions
You have until April 18, 2011, to contribute up to $5,000 to a traditional IRA for 2010 and deduct it on your tax return. Here are some guidelines.
If you weren't covered by an employer's retirement plan in 2010, you can generally deduct your contribution in full.
If you were covered by an employer plan, you can only take a deduction if your adjusted gross income was below $66,000 ($109,000 for married couples).
If your spouse was covered, but you weren't, you can take a deduction if your combined adjusted gross income was below $177,000.
If you were age 50 or older on the last day of 2010, you can contribute up to $6,000.
2. Self-employed Retirement Plans
If you work for yourself, you can open a Simplified Employee Pension-IRA by April 18, 2011, and deduct your contribution on your 2010 return. SEP-IRAs are an easy way to create your own retirement plan, and they can allow much higher contributions than traditional IRAs.
3. Mortgage Interest
You can deduct interest paid on your primary mortgage, as well as home equity loans and lines of credit. In general, you may deduct interest on up to $1 million of primary mortgage debt and up to $100,000 of home equity balances.
4. State and Local Taxes
Feeling like every single government entity is after your money? Fortunately, the federal government cuts you a little slack, letting you deduct property and income taxes imposed by state and local governments.
5. Sales Tax
If you paid little state income tax, or live in a state that doesn't tax income at all, you can choose to deduct sales tax instead. And you don't need receipts. Simply calculate an assumed amount using an IRS table or online calculator.
6. Charitable Gifts
Donations to charity can ease your tax burden, but only if you have the right documentation. Cash contributions, regardless of the amount, require a cancelled check or dated receipt. Any contribution of $250 or more requires a written acknowledgement from the charity. Noncash contributions valued at more than $5,000 generally require an appraisal.
7. Student Loan Interest
Some or all of interest on loans taken out to pay qualified higher education expenses is generally deductible if your adjusted gross income is less than $75,000 ($150,000 if you're married and file a joint return). You may also be eligible for the Hope or Lifetime Learning tax credit (See IRS Publication 970).
8. Medical and Dental Costs
The government sets a high hurdle for these expenses. You can only deduct them if they exceed 7.5% of your adjusted gross income.
9. Health Insurance
Self-employed taxpayers get a big break on one of their biggest financial headaches. In general, they can deduct all of their health insurance premiums.
10. Health Savings Accounts
If you were covered by a high-deductible health insurance plan in 2010, you can contribute up to $6,150 to a health savings account ($3,050 if it only covered yourself). Contributions are deductible and withdrawals for qualified medical expenses are tax-free. Similar to IRAs, you have until April 18, 2011, to contribute for the 2010 tax year.
11. Job-related Moving Expenses
If you moved to take a new job, you can deduct your expenses if you pass these two IRS tests:
Your new job must be at least 50 miles farther from your old home than your previous job was. If you didn't have a previous job, your new one must be at least 50 miles from your old home. If you're in the military with PCS orders, you do not have to meet these rules.
If you're an employee, you must work full time for at least 39 weeks during the 12 months after you arrive in the general area of your new job. If you're self-employed, you have to work full time for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months.
12. Guard and Reserve Travel Expenses
If you traveled more than 100 miles to attend a drill and spent the night, you can deduct your lodging expenses, half the cost of your meals and 50 cents per mile for travel. You can also deduct tolls and parking fees.
13. Out-of-pocket Teacher Expenses
Teachers, aides, counselors and principals -- kindergarten through 12th grade -- can deduct up to $250 for classroom supplies purchased in 2010.
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