 Although we’re still
months away from the April 15th tax deadline, here are
some tips to help you avoid the last minute heartburn of
tax filing season.
Itemized Deductions
Some people automatically take the standardized
deduction and overlook some itemized deductions that
could save them money.
For example, if you’re
between jobs, it would be advisable to save receipts
relating to looking for a new job, such as phone bills,
resume expenses and travel expenses.
Real estate taxes are
deductible, so be sure you deduct taxes paid through a
mortgage escrow account. And if you recently purchased a
house, look at your settlement statement for any taxes
for which you reimbursed the seller at the closing –
these are deductible.
You can also deduct
the software expenses and tax preparation expenses as
miscellaneous itemized expenses.
Always have your tax
returns from the previous year in front of you when
you’re preparing your taxes.
It would be a good
idea to review your withholding allowances at least
every couple of years. IRS controls how many allowances
you can have, but judging from all the taxpayers who
receive refunds each year, most taxpayers claim too few
deductions rather than too many.
If you see it as a way
of saving money, there are better ways to accomplish
that goal and earn interest on the money. Uncle Sam
doesn’t pay interest.
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A home equity loan may offer you great tax savings
opportunities. Home equity lines of credit have become
popular with millions of homeowners. These loans are
secured by your home and often carry lower interest
rates than unsecured borrowing, plus you are still able
to deduct the interest on your taxes. However, be aware
that by securing such a loan with your home, you risk
losing your home should you be unable to repay the loan.
There is a tax
withholding rule that applies to lump sum payments from
company retirement plans. Whether you receive a lump sum
payment when you retire, quit or are laid off, your
employer is required to withhold 20% in taxes. This is
true even if you intend to roll the money over into an
IRA or another pension plan within the allowed 60 days.
In order to avoid the withholding trap, simply have your
employer roll the funds into an IRA. They will handle
the transfer and you will not have to pay taxes.
There are many itemized deductions that may apply to you
including: child tax credit, college student and family,
loans to family members, income in respect to death of
family member, repairs on rental property, stocks and
bonds, and your 401K. Also, remember to save all of your
receipts from charitable and church donations for
additional income tax credit when preparing your return.
If you have any questions about possible deductions, it
is best to check with a tax or financial planning
advisor to make sure you get the most allowable
deductions possible.
CONSUMER TIPS is provided as a public
service by the Missouri Independent Bankers Association
AND
Community Bank of the Ozarks
P.O. Box 43
Sunrise Beach, MO 65079
(573) 374-5245
1-800-927-4314
www.cbobanker.com
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