At this point, everyone has begun receiving the information they need at this point to file or at least to compile, information for their individual tax filing due April 17, 2012 for the calendar year 2011. Various laws have changed over the past few years making filing harder every year, even for CPA’s like me. The good news is not much changed for the 2011tax filing year. This article focuses on some of the most commonly over looked deductions and income as well as mistakes people make when preparing their taxes. Whether you prepare your own taxes or have someone prepare them for you, hopefully this article will help your tax situation.
In the area of charitable giving, a lot of taxpayers don’t think about various aspects of that deduction. Everyone thinks about church giving because you get a statement, but many other charitable deductions, even though small, can add up. Make sure to save receipts and check copies for any and all donations to qualified nonprofit organizations. If you drive your vehicle for charitable purposes, the miles you drive count as a 14 cent per mile deduction. Also, goods donated to the soup kitchen and emergency shelter are deductible. Items made for bake sales etc can be deducted to the extent of the cost of the ingredients. For noncash items donated to various charities, make sure to document well the value of items given. The items have to be in good or better condition to take a deduction but can have great value. Make sure to keep itemized lists attached with the receipts received from the charity, a few photographs to document the quality or quantity, and maybe the tags if you gave away new clothing. There are various websites that will assist in the valuation process. While it may not seem like a lot, every dollar counts.
In the area of deductible taxes, many people forget to list vehicle property taxes as a deduction. All property tax paid is deductible, whether for real property or personal property (vehicles, boats, four wheelers, golf carts, etc). In addition, if you owed on your state income return last year, that amount is deductible this year. If you have a low state tax burden (which is often the case for military, federal and state employee retirees, you can elect to deduct sales tax either from a table provided by the IRS for our area or if you keep up with all your receipts, the exact amount of sales tax paid. If you use the table provided by the IRS, you can add sales tax paid on the purchase of motor vehicles, aircraft, boats or materials used to build a home as an extra addition to the sales tax provided by the table.
If you have children in college, make sure to take advantage of the American Opportunity Credit, available for students in their first four years of college if they are enrolled at least half time. In addition to tuition and associated class fees, books, equipment and supplies are also now included in this credit/deduction. A taxpayer is allowed a credit (dollar for dollar credit against taxes) of up to 100% of the first $2,000 of qualified expenses and 25% of the next $2,000. Also, the credit is also classified as a refundable credit so up to 40% of this credit can be received even if it exceeds your taxes. In lieu of the credit, a taxpayer can elect a tuition and fees deduction. You should calculate your return using both the credit and opting for the deduction to see which yields better results. Don’t forget the state impact as there is only a deduction from federal income on the state if a credit is taken on the federal return.
For homeowners who spent money making their home more energy efficient you should take advantage of an energy credit that allows for up to $500 maximum credit. The only The following are examples of items that qualify: new windows (including skylights); exterior doors; insulation and/or systems which reduce heat gain or loss; heat pumps; central air conditioners; natural gas, propane or oil furnaces or hot water boilers; and qualified advanced main air-circulating fans. This credit applies for principal residences only and, if you have taken the credit any year since 2006, you have to deduct the prior amount taken from the $500 lifetime limit, lowered for 2011. In addition, there are expenditures which qualify for an energy credit that can be used for principal residences or second homes. This is the credit for solar, wind or other alternative energy equipment equaling 30% of cost with no maximum credit limit.
And last, but not least, there is tax relief for people who lost property or suffered damage during Hurricane Irene. Casualty losses can be taken to the extent the losses were over and above what insurance covered, and to the extent it exceeds 10% of your adjusted gross income. You must itemize to take advantage of this deduction.