Taxes (Photo credit: Tax Credits) As you prepare your tax return, you have a decision to make about your tax deductions – you can choose between itemizing and using the standard deduction. But how do you choose? The Standard Deduction is just what it sounds like – a standardized deduction that you can choose to utilize by default, and you don’t have to do a lot of recordkeeping through the year in order to use the the standard deduction. In order to itemize deductions, you need to save receipts from various deductible expenses through the year, and use those to prepare your itemized return. Oftentimes it is a foregone conclusion, once you understand the differences between itemizing and the standard deduction. Standard Deduction vs. Itemizing: Facts to Help You Choose Each year, millions of taxpayers choose whether to take the standard deduction or to itemize their deductions. The following seven […]
itemized deductions
Tips for Tax Time
Given that it the start of tax season and individuals will be gathering and preparing their 2015 tax return information, I’d thought I’d put together some basic tax tips. Individuals may consider thinking about these items in order to have a smooth and (hopefully) stress-free 2015 tax season. Additionally, I’ve included a link to our 2015 Tax organizer. Please feel free to use it at your convenience to get your “tax ducks in a row”. Furthermore, please let us know if you’d like us to prepare and file your taxes for you. Many current clients have found Blankenship Financial to be cost effective and efficient compared to other big-named tax preparation services. As Enrolled Agents both Jim and I are well qualified to handle most tax matters and returns. And now with the tax tips… Beware the non-tax man cometh! Each year we field calls from clients and prospective clients […]
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Should You Pay Off Your Mortgage Early?
As individuals pursue the American Dream of buying their first or next home the question may arise on whether or not it’s a good idea to pay down the mortgage and have no mortgage debt or pay the normal monthly payment and invest the extra money that would have gone to pay down the mortgage early in a place (the stock market) that offers the potential for higher returns over the long run. There are many fierce advocates for paying off debt, any debt early. While this is a wise choice regarding high interest debts such as credit cards, student loans and other high interest loans it may not necessarily be the case for home mortgage debt. Here’s a situation where for some folks it may make sense to pay down early and for others they may wish to consider invested the extra money elsewhere. Generally, the younger a person […]
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Can You Itemize? Or, Should You Itemize?
When you prepare your taxes each year, you’re faced with a decision – itemize deductions or take the standard deduction? Most of the time it’s not a question of whether you can itemize, but rather should you itemize. Most Anyone Can Itemize… This is due to the fact that most anyone can itemize. If you’ve paid state and/or local income or sales taxes, real estate taxes, or paid mortgage interest, you have deductions to itemize. Same goes for charitable contributions. All of these items that you’ve paid out are eligible to be deducted on Schedule A of your tax return, without a lower limit. If you have medical expenses, these can be deductible if the total of your medical expenses are more than 10% of your Adjusted Gross Income (AGI). For 2013 tax returns, if you’re 65 years of age or older, your medical expenses that are more than 7.5% […]
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Charitable Donations
This time of year many people find it in their hearts to give. They’ll give to friends, family, loved ones and charitable organizations that can help maximize the gift such as a church, charity, or foundation. Last week I had written about the law of reciprocity and giving, and this week I’d like to mention how you can make your giving work in favor when tax season rolls around. As of this writing there are about 11 days left in 2013. Some individuals will be looking to see how much they can give or how much more they can give in order to receive the biggest tax deduction they can for charitable giving. Of course, gifts to friends and family are not deductible, but there are times when gifts or donations are completely deductible and may be to the tax advantage of the person giving or donating the gift. According to […]
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Charitable Contribution Tips
As the tax year comes to a close, many folks are looking for ways to reduce their taxes by making charitable contributions. During December’s various holidays many folks are inclined to make extra contributions as well, in the spirit of the season. The IRS recently published a Special Edition Tax Tip 2012-15, which offers tips for tax benefits of gifts that you might make. The actual text of the Tip is reproduced below: IRS Offers Tax Tips for “The Season of Giving” December is traditionally a month for giving generously to charities, friends and family. But it’s also a time that can have a major impact on the tax return you’ll file in the New Year. Here are some “Season of Giving” tips from the IRS covering everything from charity donations to refund planning: Contribute to Qualified Charities. If you plan to take an itemized charitable deduction on your 2012 […]
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IRS Sets 2013 Standard Mileage Rates
For several different categories of deductions, there are standard rates set by the IRS for mileage. The deductions are for business-oriented mileage, both for your own business and for miles driven on behalf of an employer (if deductible), as well as for medical purposes, deductible moving costs, and for charitable activities. These rates are set on a “per mile” basis. The IRS calculates the applicable costs associated with driving these miles on an annual basis, which includes the cost of fuel, maintenance, insurance, taxes, and the purchase price of the vehicle (or rather, depreciation). This allows for a much more simple method of deducting these costs rather than adding up all of the costs of a vehicle and then allocating an appropriate portion to the deductible use. You can choose between using the mileage rate or adding up all of the costs for your vehicle use, but once you’ve started […]
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Managing Tax Records
(Photo credit: Wikipedia) Most everyone has a monster file cabinet or file box (or dumpster?) where tax records are kept – and you find yourself wondering if keeping all this junk is really necessary… The IRS recently published their Tax Tip 2012-71, which discusses how you should go about managing your tax records. The actual text of the Tip is listed below: Managing Your Tax Records After You Have Filed Keeping good records after you file your taxes is a good idea, as they will help you with documentation and substantiation if the IRS selects your return for an audit. Here are five tips from the IRS about keeping good records. Normally, tax records should be kept for three years. Some documents – such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property – should be kept longer. In most cases, the […]
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End of Year Roth Conversion Strategy: Fill Up the Bracket
Image by agrilifetoday via Flickr If you’re in a relatively low tax bracket and have funds in a traditional IRA or Qualified Retirement Plan, chances are you might be in a position to set yourself up with tax-free income via a Roth Conversion. One method that can work in your favor is the “fill up the bracket” technique, and if you want to do this for 2011, you’re running out of time, it must be done by December 30 (December 31 is a Saturday). The way this works is that you determine what your regular income is, and then look at where you are with regard to your tax bracket. If there’s still some “headroom” in the current bracket, you could convert an amount, equal to or less than your “headroom”, from your traditional IRA to a Roth IRA. This way you are controlling the tax rate at which your […]
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Year End Income Tax Planning
Image via Wikipedia Once you’ve reached the last month of the tax year, there aren’t a lot of things that can be done to minimize your income taxes. But there are a few things that could be done. For example, you could double up your real estate taxes by prepaying next year’s tax during December. Doing this with, for example, a $3,000 per year real estate tax bill could result in a reduction of tax for the year of $750 if you’re in the 25% bracket. Keep in mind though, that you’ll have forked out this money long before it is actually due in most cases, and for the next year you won’t have this deduction available if you used it in this year. The same could be done with your charitable contributions – there’s no reason that you can’t make additional contributions to your favorite charities at the end […]
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