It is that wonderful time of year again to get our taxes in order and completed. In order to help ease the burden of dodging Uncle Sam, here are some often overlooked and unnoticed tax deductions that can help give better insight and hopefully make things easier for you as a newlywed, parent, or homeowner.
Tax Breaks To Help Newlyweds
A good deal of the population thinks that once you get married you will save so much more money on taxes now that you are married. But this is not always what happens. In fact, you may actually be paying more taxes as a married couple than if you were paying individually because you have now unfortunately gotten into a larger tax bracket because of your income. It is also the most undesirable group of taxpayers in the US having a two-earner income with no children. If you think you will be one to take a big tax hit from deciding to get married, let’s see if you’re able to qualify for any of these deductions.
1. Take your wedding expenses and use as a charity donation. If you chose to get married at the church or a historical registered site, you might be allowed to deduct the expenses paid to the place you had your wedding as a charitable contribution. This also applies to any of the leftover food, flowers, or any decorations you used from your big day. Even the wedding dress can be deducted if you choose to donate it to the local Goodwill, Deseret Industries, Salvation Army, or any other thrift store. Local food banks would love the leftover food.
- Be aware that you cannot take the full amount of your $25,000 wedding dress and write it off. You can however, write off the acceptable retail rate of the dress, or the price somebody would agree to compensate you for the used dress.
2. Moving expenses for work. If having to move out of state or city for a fresh start with starting your life together, or changing jobs to move across country to be with your spouse. There could be some great news. Career related moving costs not paid by the employer you will be starting your job at, could be a tax deduction. Here is a little of the criteria to do so.
- First you need to know about the distance requirements. Your brand new place of employment needs to be at a minimum of 50 miles outside of where your old employer is located and where you call home. So to help you understand this better, if you would have stuck around in the old house, would it have added the necessary 50 miles or more to your travel for work? If yes, then you have met the distance requirement.
- Time limits are also part of the deal. As a jobholder you must work and be employed full time at least for a minimum of 39 weeks for the first year once moved. If you are self-employed, be sure to also follow the same 39 week rule of employment that first year. You also need to fulfill a grand total of 78 full time weeks of employment for those first two years.
- Make sure to deduct your moving expenses and storage costs; this may be overlooked as sometimes your new company has already put moving expenses in you W2. Let’s say your new employer gave you an agreed amount of money to move with, and you can’t recall the total amount as it was already reported as income. But don’t forget you can deduct anything that those moving expenses cost you that exceed the original amount.
Tax Breaks Parents May Miss
Rearing a child or children is one expensive undertaking. They say it will take over $200,000 in the span of a lifetime. As the hefty amounts of money you will be spending on child expenses occur, it is always nice to attempt to get some money back in the way of credits and deductions for parents. Here are some tax deductions that you may have overlooked.
1. Camps and School costs. Most parents have heard of the child and dependent care tax credit that can assist in the ease of the child care expenses for working moms and dads. This credit works as a percentage; it is decided by what your personal adjusted gross income is with the care of your child’s expenses. You could recoup up to the amount of $3,000 with a single child and up to $6,000 with multiple children. The credit will actually extend beyond how much you are paying for your Child’s babysitter or day care costs. Keep in mind you both need to be working, you are also able to deduct your child’s sport and summer camps. Plus, your state may offer a school tax credit for your Child’s private school educational expenditures or a contribution made to the child’s school in favor of extracurricular or after school activities.
2. Paying your kids if you own your own business. If your children are helping you with family business matters by stuffing envelopes being the janitor or even answering phones, they may help you with tax deductions. If you are paying your children a fair amount of pay, it could help you to reduce your own taxes that you would pay because your child’s income can be written off as a business expense from your own personal business income. Also when you are paying for your own child’s wages, you are essentially taking part of your company’s income from the tax bracket you are paying into, and putting it in their tax bracket. This means that you’ll be taxed with a lower cost effective rate. This could help shift the revenue that you would have paid. Take that 40 percent tax rate, to a mere 0-10 percent tax bracket. And all you have to do is simply pay your children. So it helps to employ your children.
3. Make sure to take the earned income tax credit. Earned income tax credit aka the (EITC) has been arranged to help families with low to moderate income get much needed tax break. The IRS estimates that one out of every five families that qualifies for the tax credit never takes it. The reason this happens is because parents don’t realize that if their income changes it may qualify them. Let’s say that your spouse or you were unemployed for 2014, you may now be eligible for the tax credit when you couldn’t previously. Depending on how you file your status and income the Earned Income tax credit could be huge. If you are married and decide to file jointly with your three children who has earned less than the $52,427 you could get up to $6,143
Tax Breaks For Those Self-Employed
When having your own business and hustling to get work and juggling your often shaky income that is never steady. Then having to pay the dreaded self-employment tax, because you are in the small business world will often times make you feel like your financial future seems bleak when you are doing freelance work or have a small business. You also face having an audit if you have itemized too many write offs and deductions, even when you feel you’re entitled to have those write offs. If you are deciding or needing to file as self-employed, these are often some of the overlooked tax breaks that could help ease the brunt of it all.
1. Home office deductions. Taking the home office deductions is not anything new but what has changed is the amount of record keeping skills you now need to file, it is easier than ever, which is what held many back from taking this specific deduction in the past. Many felt taking the home deductions was a red flag that you would get audited. This may not always be the case now, still possible but not like it used to be. Back in 2013 the IRS decided to be awesome and make the deduction process easier by having the self-employed worker have a safe harbor option for their deductions. All you need to do is multiply the square footage of your office space by $5, up to 300 square feet. You can also do the traditional way of figuring it out by itemizing the prorated share of deductions you would take on your home, including things such as, mortgage interest, real estate taxes, insurance, and utilities. Just be sure you have kept flawless records. What hasn’t changed however is which way you choose to do your taxes is be sure that your home office is used as your principal place for work and only used for professional purposes.
2. Transportation needs for your business. Working from your home usually means your commute is perfect as you don’t need to fight the rush hour morning traffic, just fighting to make sure your kids are off to school. But what if you are meeting clients throughout the day? What if you are having meetings across the city or town? The transportation costs can be a write off as a business expense. The first time you are driving for the day followed by the drive home from your meeting with clients is called the commute. That is not deductible. But if the first commute is 30 feet away to your home office, and then the next commute is to your clients home, that is what is deductible. This helps small business owners almost double their vehicle deduction just by having that home office.
3. Health Insurance premiums. Even with the Affordable Care Act, your personal health care costs can get pretty disheartening. The good news about this is you could get a tax break on any health insurance you have paid for yourself, spouse, or other dependents living with you. As long as it is for the months you weren’t protected or eligible to be covered under your spouse’s health plan under an employer.
Tax Breaks For Homeowners
The old adage that your home will most likely be one of the biggest investments you will ever make is true, so make sure you take advantage of all the tax benefits that come from owning your own home such as writing off your mortgage interest or property taxes. Other often overlooked write offs can also help you to get some much needed tax benefits
1. Property damages. If you had a natural disaster that did a crazy amount of damage on your home and property that your insurance decided to not cover everything, then you may qualify for the casualty deduction. This tax deduction will help you deduct a portion of the damages and losses that are unreimbursed that happened to your home, household items, or even your vehicles that were caused by an unexpected or unusual event such as a natural disaster, or horrible car crash you were not responsible for.
2. Mortgage points and other fees. Many homeowners seem to forget about the point or loan origination fees you pay out to acquire a home loan in the first place. It will usually show up on your 1098 form. You are allowed the write off in the year that you paid them, if you meet the qualifying conditions, if you don’t meet them, you can still deduct them over the lifespan of your loan. If you are planning to refinance and have been deducting points over the lifespan of your mortgage, you are allowed to also write off the left over points on your old loan once you receive your new loan.
3. Upgrade your home with energy savings. When you make environmentally sound home improvement projects to your home, such as buying the energy efficient thermostat, windows, or even adding more insulation could get a tax credit. Just be sure to hold on to the documentation stating from the company and fabricator that their products qualify for the tax benefit.