It is a new year, which means that tax time will be coming soon. You really do not want to wait until April to take care of this task. It is stressful to worry that you will not file by the deadline. But if you are due a refund this year, the longer you wait to file, the longer you give the Internal Revenue Service an interest-free loan on your money. Take advantage of these deductions to save big on your 2013 returns.
If you do not have a mortgage or significant other itemized deductions to make, you will probably decide to claim standard deductions on your taxes. This simplifies the tax-filing process for you. The IRS has increased the deductions slightly for 2014, at $12,400 for married couples filing jointly, half that for singles or married couples filing separately, and $9,100 for those filing as head of household.
At the point that your deductions for mortgage interest or other expenses exceed the standard deduction, you should seriously consider itemizing your expenses on your taxes. If you own your home and have a mortgage you pay on it, you may be able to deduct the interest you pay on the mortgage. Even if you have a mortgage on a second home, as long as you live in it as a second home, you can also deduct the interest paid on that mortgage.
When you itemize your deductions, there are other expenses you should consider deducting from your tax liability. If you have significant medical expenses that take up over 10 percent of your adjusted gross income on top of what your insurance covers, you can deduct expenses that exceed that 10 percent. Qualified payments include:
doctor visits and prescribed treatments
Over-the-counter medications and toiletries are not included. Since this does not end up as a large deduction for most individuals, you often are better off setting up a Flexible Spending Account for your out-of-pocket medical expenses.
Children & Education
If you have child dependents, you probably can claim them or their educational expenses on your taxes. For each child under your primary care who is under the age of 17, depending on your adjusted gross income, you can take a $1,000 credit. For young adult dependents, you should take advantage of the various education deductions and credits. College students may claim their tuition and fees as a deduction on their taxes. If they are ineligible for that deduction, they can still claim some of their tuition and fees through the Lifetime Learning Credit, and also deduct their student loan interest.
Taxes & Preparation
Do not forget about the taxes you pay and the people you hire to prepare them. You can claim last year’s state income taxes as a deduction on your taxes this year. And you may deduct at least some of the fees you pay for tax preparation.
Preparing and filing your taxes is always an investment of your time. There is always a risk that if you claim the wrong deductions, the IRS will want to audit you. But if you do your homework and claim your deductions properly, you will save money and keep the IRS happy with you.