Did you roll with me last week and get all of those income items organized for your tax return? Of course you did (but just in case, feel free to skootch back a week and take a look at it at how easy it is to get yourself organized way before April 15th.)
Let’s press on this week and pull together everything for the “deduction” side of this tax business. This is the good stuff so let’s dig up some receipts and bring down that taxable income!
Adjustments – these reduce gross income and are really important as a lot of “phase-outs” and other calculations are based on Adjusted Gross Income (AGI) so it’s helpful to have big numbers here.
- Teachers – you still get a little tax benefit for buying supplies for your classroom. Gather those receipts.
- Health saving account – if you had a high deductible health insurance plan and made contributions to this type of account, make note of what you contributed.
- Also, if you took any withdrawals here, make sure you have the receipts to keep with your tax return.
- Moving expenses – these are for job-related moves so if you moved, check with your tax preparer.
- Deductible part of self–employment tax – the software will take care of this one for you.
- SEP, Simple or other qualified retirement plans for self–employed – if you are self-employed, it may not be too late to set up a retirement plan for your business and make a contribution for the 2015 tax year. Check with your accountant to see if it will work for you.
- IRA – if you made an IRA contribution be sure to let your tax preparer know. There are some income and other parameters in order for it to be deductible but making a contribution is still a good thing regardless. And it’s not too late on this one either. You have until April 15th to get some money in there.
- Student loan interest – be sure to gather up any 1098-E for student loans. There are limitations here but be sure your tax accountant has the details.
Deductions – “Schedule A” – I’m sure most people who own a home are familiar with most of these so they should be easy. Gather up all receipts that relate to:
- Taxes – income taxes paid, real estate taxes and personal property taxes – remember, if you bought a new car in 2015, you paid your ad valorum tax upfront so may have a big number here.
- For older cars, you may still be paying ad valorum tax with your car tags.
- Interest on your mortgage – you know this one; just grab the 1098 from the mortgage company.
- Gifts to charity –
- You will need the who, what, when and where (charities address) so gather up all of those details. You also need “how much” as in what is the value of the item you donated so make a good list of those non-cash charitable donations. You can price them by looking at the Valuation Guide created by Goodwill: https://www.goodwill.org/wp-content/uploads/2010/12/Donation_Valuation_Guide.pdf
- For cash gifts, a cancelled check isn’t good enough so be sure you got a receipt from the organization.
- Casualty and theft losses – if life handed you lemons this year, keep track of your losses and see if Uncle Sam will give you a little lemonade.
- Job expenses, tax return prep, and investment management fees – yes, these are subject to the 2% threshold to be deductible but gather it all up. It never hurts to add it up.
Credits – maybe yes, maybe no on some of these. Be sure to round up any college-related paperwork. You will get a 1098-T for college tuition but be sure to gather up the cost of books as well. Did you make your house more energy efficient this year? You may qualify for the residential energy credit.
See, that wasn’t so bad. Nothing feels as good as getting all of that tax return paperwork handed off to someone else! If you do your own, make a plan to open up that tax software and spend just 10 minutes typing in information. Set the timer on your phone – just 10 minutes. Peck away at jobs that you don’t enjoy, and it will be done in a painless way. No one wants to think about spending hours on a Saturday droning away on taxes so spend a bit of time doing one section and be done for the day! Do a bit more tomorrow. You will be glad that you are not spending an April day working on taxes. Get ‘er done, ladies, get ‘er done!
To your financial (and tax) success!