Senior Mortgage Loan Originator
Alaska USA Mortgage Company NMLS Unique ID #204060
Phone: (907)796-1202 / fax 907-929-6711
Fax: WA Consumer Loan Co. License #CL-157293
License: Mortgage License #AK157293
Year-End Tax Tips:
Maximizing Your Deductions
By Mary Beth Franklin
Last month, our good friends at Kiplinger's Personal Finance magazine shared valuable tax tips to assist investors with maximizing profits. In this month's feature, we turn our attention towards deductions that could save taxpayers a bundle.
The secret to successful year-end planning is to think about taxes two years at a time - '07 and '08. The goal is to reduce the tax you will pay over both years, not just one. This means estimating your income and deductions for each year. Ask yourself, what should fall into '07, what should fall into '08, and what could be available for either?
Three categories of itemized deductions are easiest to juggle to maximize tax benefits: charitable contributions, state and local taxes, and interest expense.
Other itemized deductions can reduce your tax bill as well. When it comes to medical expenses, only the total exceeding 7.5% of adjusted gross income (AGI) can be deducted. So it pays to pile on the expenses in one year if you are near or have exceeded the limit. For casualty losses, you get no deduction until the uninsured part tops 10% of AGI. Miscellaneous itemized deductions must exceed 2% of AGI before you start taking them. Examples are fees for IRAs, job-hunting costs, tax and investment advice, safety deposit box charges, and unreimbursed employee business expenses.
Itemizers can fully deduct other things as well, such as amortizable bond premiums, impairment-related job expenses of handicapped persons, gambling losses (to extent of winnings) and estate tax on income that heirs inherit from decedents, such as interest on savings bonds and distributions from IRAs.
Taxpayers can flip-flop between itemizing and taking the standard deduction. They can cram itemized deductions into one year and use the standard amount the next. Standard deductions vary by filing status, age, and so on.
Some deductions can be taken whether you itemize or not: alimony, penalties on early withdrawals of deposits from CDs, Keogh contributions, and some student-loan interest. You also get to deduct job-related moving expenses (only travel expenses during the move, excluding meals, and the cost of moving household goods). In addition, don't forget to include health insurance for the self-employed.
One common area for deductions is the individual retirement account (IRA). Many people can deduct $4,000 per year, but be aware that if you or your spouse belong to an employer's plan or if your incomes are above certain levels, you won't be able to deduct the full amount, possibly down to nothing. IRAs offer great flexibility because you can make a pay-in until April 15th, and it will be deductible from your LAST year's taxes
Tax planning can be too daunting for many taxpayers to do on their own. But keep these tips in mind even if you have a professional tax preparer. You'll know what to look and ask for in reviewing your return. And be sure to hold on to your records for at least three years after you file your return. Six years is even better.
Reprinted with permission. All Contents © 2007 The Kiplinger Washington Editors
License AK# 157293 Washington Consumer Loan Company license# CL-157293 California Residential Mortgage Lending Act, License# 4131067
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8390 Airport Blvd, Suite 102
Juneau, AK 99801
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