It’s Tax Time! How To Legally Pay Fewer Taxes

Posted By Pedro Gonzalez, CPA on Apr 9, 2017 | 0 comments


Tax refund tips

 

Tax Day is on Tuesday, April 18th this year due to a Federal Holiday. I know there are some of you out there who have not filed your tax returns yet. If you are one of them, this article is for you.

Here will we explore three areas of your tax return that will yield the highest impact in the amount of your refund or the reduction of your income tax liability. The three areas Adjustments, Deductions and Credits.

You will find for each of the sections, links to help you find more information to help you in your tax preparation.

 

Adjustments against your gross income:

 

       Student loan interest – the maximum amount you use against your gross income is $2,500. You can get more detailed information about this here.

       Tuition and fees – If you attended a higher-education school during the year, you may be eligible for up to a $4,000 adjustment for the cost of tuition and fees. You can get more detailed information about this here.

       Moving Expenses. If you got a new job (or first job) this year and had to move more than 50 miles for your new job, you can claim an adjustment for your moving expenses on your return. You can get more detailed information about this here.

 

Deductions against your adjusted gross income:

 

       Mortgage Interest. This expense alone is usually what swings a taxpayer from choosing the standard deduction over itemized deductions. You can get more detailed information about this here.

       Personal Property Taxes. This includes property taxes you paid for your home, cars or boats, and vacation home. You can get more detailed information about this here.

       State Income Tax vs. Sales Tax. If you live in a state that does not have state income taxes, like Florida, you are eligible to deduct your state sales tax instead. If you are in a state where you pay income tax, then you can choose between the two and claim the highest amount. Sales taxes may exceed income taxes in situations when you made large personal property items (i.e. boat). You can get more detailed information about this here.

 

Credits against your tax liability:

 

Tax credits are possibly the most beneficial tax break you have, since they provide a dollar-for dollar reduction of your income tax liability. This means that a $1,000 tax credit saves you $1,000 in taxes. So, don’t overlook your tax credits.

       Child Care Credit. To claim the care credit, the person receiving the care must be your qualified dependent and the care must be provided so you or your spouse can work. If you’re a stay-at-home mom who needs extra help, unfortunately, you won’t be able to claim this credit. You can claim up to 35% of the expenses you incurred. You can get more detailed information about this here.

       Child Tax Credit. You could receive up to $1,000 per child off your tax bill, depending on certain factors. You can get more detailed information about this here.

       Education Credits. There are two and they are:

o   The American Opportunity Credit. This credit is available for up to $2,500 in expenses paid for the first four years of college. You can get more detailed information about this here.

o   The Lifetime Learning Credit. This credit is a big one because there is not a limited number of years you can claim this credit and you can claim up to $2,000 in qualified expenses (tuition, fees, books, supplies). You cannot claim both the American Opportunity Credit AND the Lifetime Learning Credit. You can get more detailed information about this here.

If you have questions about your income tax preparation or about the information shared here, please contact me.

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