1.) Increase Your 401(k) Contribution. ABC News Consumer Report notes that there is a double benefit to doing this. You can shore up your retirement savings and lower your tax bill at the same time.
2.) Make Your January 2017 Mortgage Payment in December 2016. You also can deduct 10 percent of the cost of a home improvement, up to $500, if it’s done before the end of the year. “It only works if you itemize deductions,” says Dan Andrews, co-owner of Andrews Lemek Tax Services, LLC. “And, it only works for one year. You’re pulling next year’s into this year’s taxes. Next year, you will have to do the same thing or you’ll be short one month’s payment.”
3.) Charitable Contributions Are Fully Deductible, if Itemized. According to ABC News Consumer Report, charitable contributions can be the gifts that give back come tax time, as long as you remember to deduct them from your taxes. The higher your tax bracket, the greater reduction on your taxable dollars. Dan Andrews recommends keeping a record of the name of the charity and the amount given.
4.) Medical Costs that Exceed 10 Percent of your adjustable gross income are deductible. For those 65 and older, 7.5% of your adjustable gross income is deductible. CNN Money states the following deductions could apply: prescribed weight-loss programs, stop-smoking classes, acupuncture, chiropractic care, physical therapy, braces, eyeglasses, and lead-paint removal for children. IRS Publication 502 provides a full list.
5.) Write off a home office. The home office must be your principle place of business, and the room can’t be used for anything else. CNN Money says to figure out the percentage of your home used by an office, either by square footage or by the number of rooms. Apply that percentage to mortgage interest, utilities and upkeep.
6.) Utilize child care credit. Dan Andrews says a single person who pays daycare can receive credit for a percentage of that. In a two parent household filing jointly, both must be working to claim this. Dan recommends keeping records that include the name and address of the day care or individual, as well as the tax ID or Social Security number.
7.) Consider Various Mileage Deductions. In addition to work-related mileage, you can deduct mileage for driving while doing charity work and for frequent doctor visits and medical treatments, such as chemotherapy, kidney dialysis and physical therapy. Dan Andrews says to keep a record and itemize.
8.) Use a home equity loan instead of credit card debt. According to CreditDonkey.com, credit card debts don’t allow for tax deductions, but the interest on a home equity loan works just like the interest on a mortgage. Dan Andrews agrees. “If you itemize deductions, that might help,” says Dan. “A home equity loan or a second mortgage not only would carry a lower interest rate, but also would allow for a tax deduction, while credit card interest would not.
“We want to help people pay the right amount of tax,” says Dan. “We hope that results in the low amount, but we have a responsibility to help people comply with the law by preparing a correct tax return.”
Record Keeping Tips from Dan Andrews:
- If you entertain, keep receipts. Document who went to lunch or dinner with you, when, where, and what was the business purpose.
- If you drive for business, keep a log.
- If you use a cell phone for business and personal use, keep a log of all your business calls.
- If you’re self-employed, every business expense is deductible.A well-trained staff at Andrews Lemek can help you through the process of making out a tax return. Whether you are a senior with special needs or a young person finishing your first year on the job, Andrews Lemek tax preparers have more than ten years experience and can handle all your needs. In addition to preparing income tax returns, the firm also can help with other business services. For information, call (352) 351-8833.