So you waited until the last minute to file your taxes, probably because you may have a tax liability, or maybe you are like many of us, simply a procrastinator. Well most transactions that could have helped you proactively lessen your tax liability had to be completed by December 31st, 2007, but you knew that, that’s why you will start planning for this year’s taxes right after you have filed the 2007 tax return, right?.Now folks who are down to the wire often rush and file the return, potentially leaving cash on the table – it may behoove you to file an extension and see if any of the items listed here can help you lessen the tax bite. Remember however, that filing an extension is not an extension to pay your taxes, it’s an extension to file your taxes. Penalties and interest start accruing almost immediately. Another option is if you file your taxes and find that you have left money on the table you can always file an amendment on Form 1040X, although there are also some time constraints here.
With a few days to go before April 15, 2008 – you do have one item that you can still fund by April 15, 2008 and that will affect your adjusted gross income. A traditional IRA contribution. The maximum contribution for 2007 is $4000, ($5000 if you are over 50). Conditions apply – For more information see IRS Publication 590.
To positively impact your return, maybe an item in these 10 areas may be of help. For more general information visit www.irs.gov
1. Dependents: You can still claim your child as your dependent, getting that exemption against your taxable income, if your child lives with you, and you provide support for your child, they are under 19, or under 24 and a full-time student (i.e. have attended college or vocational school for at least 5 months during the tax year, months need not be consecutive). For more information (FMI), See IRS Publication 501
2. Home:
a. Residential energy credits if you installed doors, windows, skylights, insulation, to make your home more energy efficient.
b. Losses from casualties and thefts
c. Points paid for a mortgage or refinancing your home
i. Home Purchase: You can deduct all your points in year of purchase.
ii. Home Refinance: If you have refinanced your mortgage, you must deduct the points each year over the life of the loan. When you pay off the loan, or re-finance again – you can deduct the remaining points, unless you refinance with the same lender.
d. Mortgage insurance premiums. If you paid mortgage insurance premiums in 2007 on a qualified mortgage (principal residence or 2nd residence that is not business property), you may be able to deduct the mortgage insurance premiums as mortgage interest. Deduction may be limited. FMI: Publication 936. Deducted on 1040 - Schedule A.
3. Retirement Accounts:
a. Penalties for early withdrawal of savings
4. Miscellaneous deductions: Combined these deductions must exceed 2% of your adjusted gross and are deducted on 1040 Schedule A.
a. Job Search costs: Job advertising costs, employment-agency fees, creating, printing and mailing resumes, business cards, travel to interviews, travel expenses (transportation, lodging and 50% of food) if you go away from home overnight.
b. Subscriptions for work-related publications
c. Membership dues for professional associations
d. Tax preparation fees – includes tax manuals, and software, if you do your taxes yourself
5. Deductible Employee Expenses : Subject to 2% of your adjusted gross income. Form 2106.
a. Jury pay paid to employer.
b. Moving expenses to get to your first job. If you moved more than 50 miles, you can deduct the cost of getting yourself and your household goods to the new area, including mileage, parking fees and tolls for driving your own car.
c. Phone calls related to your work made on your personal cell phone
d. Phone calls (long-distance) related to your work made on your home phone
e. Qualified items you purchased for your job that were not reimbursed
f. Traveling to temporary job site. If your commuting to a temporary job site is expected to last one year or less, you can deduct this cost as a deductible employee expense, subject to 2% of your adjusted gross income.
g. Passport. If you are required to acquiring a passport for a job-related trip, you can claim the cost as an employee business expense – subject to 2% of AGI.
h. Medical exams: Required by your employer for employment – subject to 2% of AGI.
i. Uniforms. If special work clothes or uniforms are required by your employer and they are not suitable for regular everyday use, the cost and upkeep of these clothes can be deducted – subject to 2% of AGI.
j. Mileage. To employer-required work related education (Pub.970)
k. Mileage. To secondary business locations (non-commuting miles)
6. Education:
a. Tuition and Fees Expenses. Modified AGI (MAGI) limits apply. See IRS Publication 970
i. Hope Credit
ii. Lifetime Credit
iii. Tuition Deduction - phaseout starts at $65,000 single and $130,000 filing jointly. You cannot take the deduction if you modified AGI is over $80,000 single and $160,000 filing jointly.
b. Student Loan Interest – qualified taxpayers can deduct up to $2500. Phase out starts at $70,000 for single filers and $140,000 for joint filers. Filed on Form 1040.
c. Educator expenses. Teachers and teacher–aides can claim out of pocket expenses up to $250.
7. Taxes:
a. Sales Tax – if you purchased and paid sales tax on a car, boat, airplane, or house, you can add this to the sales tax calculated by the IRS tables – but only to the extent that the sales tax is within your general sales tax rate.
b. State tax you paid last spring. Did you owe tax when you filed your 2006 state tax return in the spring of 2007? Then remember to include that amount with your state-tax deduction on your 2007 return, along with state income taxes withheld from your paychecks or paid via quarterly estimated payments.
c. Overpaid Social Security Taxes – If you worked for more than one employer and your income exceeded $97,500 – excess Social Security may have been withheld – The combined amount should be $6045. The overage amount can be claimed as taxes paid and will reduce the final amount of tax owed on your return.
8. Work:
a. Home Office Deduction – if you do not have a fixed location for your business – and you uses the space exclusively for business – for administrative and management activities. Keep your records, and having a photograph of the space won’t hurt.
9. Charity: Mileage. To qualified volunteer activities.
10. Medical: Combined costs must exceed 7.5% of your adjusted gross income
a. Medical insurance premiums, but not long-term insurance premiums.
b. Medical co-pays
c. Cost of alcohol or drug abuse treatments, weight loss programs, smoking cessation programs
d. Medical expenses such as – prescription eyeglasses, contacts, hearing aids, crutches, canes, and orthopedic shoes
e. Medical transportation costs – e.g. to get a procedure done in another state – food and lodging may also apply
f. Mileage. To and from medical appointments and facilities, including pharmacies.
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