An old saying has it that the only two certainties in life are death and taxes, and even paying taxes is surely more pleasurable than the alternative. Most people would prefer to pay as little in taxes as possible. Taken together with the challenging current economic climate, every extra dollar saved on taxes is likely to be a needed one. While reducing taxes can be a year-round pleasure, these year-end tax tips have plenty to offer the taxpayer come filing time.
Cut the Losses
Given the economic climate, many taxpayers (also known as investors) have seen their portfolios take an economic hit and experienced a loss. If there is any bright side to this situation, it exists in the tax realm. Those who have experienced an economic loss can take a tax deduction (up to $3,000) against income. If losses exceed that amount, keep track and take another deduction next year.
Don’t Understate Your Charitable Good Works
One common mistake taxpayers make when itemizing their charitable contribution for the year is to undervalue their charitable contributions. Not only should cash donations to charities be considered when preparing taxes, but so too should donations in kind (like furniture and vehicles donated to a charity), which are frequently undervalued by taxpayers on their returns.
Another seldom-taken deduction is the mileage required to reach a volunteer site. If a taxpayer helps out at a food pantry once a week, for example, a tax deduction of 14 cents per mile can be taken. This comes in handy for those who have steady volunteer positions, need to drive a great deal for their charitable assistance, or travel cross-country to assist with a charitable project, such as disaster relief.
Given the sheer number of people out there job hunting right now, this deduction is likely to be more needed than ever before. Expenses related to job hunting can be deducted, including printing resumes, transportation to interviews, job agencies fees, and even moving expenses if that new job is your first and at least 50 miles from home. National Guard members can deduct the expense of traveling to drills if more than 100 miles from home and require overnight stays.
Assistance for Seniors
According to AARP, another overlooked year end tax tip applies to those over the age of 65 who choose a standard deduction (rather than itemizing). While the standard deduction is $5,700 for individuals and $11,400 for married couples, those over 65 are able to add an additional deduction of $1,400 for singles and $2,200 for married couples to their total.
AARP also recommends checking state regulations, particularly on retirement and pension income. Many states exempt up to $20,000 of retirement income for seniors.
Even using just one of these year-end tax tips can result in substantial savings come filing time. Keeping good records throughout the year is essential. Often taxpayers need to fully document energy tax credits, job-hunting expenses, and financial losses to receive the appropriate deductions and avoid any problems with later audits.
Taxes must be paid, but ensuring that every taxpayer gets his or her full deduction is a rewarding feeling.