Tax law can be complex. There's much to know to be sure you're doing all you can to get what you deserve. Here are some personal and business tax tips to get you started.
Personal Tax Tips
Charitable Donations As a donor, you may not deduct labor or time, but you may deduct expenses such as mileage, uniforms, and even the cost of taking underprivileged youth to sports events or movies.
Moving Expenses If you moved more than 50 miles for work and stayed employed, you might be able to deduct reasonable moving expenses. No itemization is necessary.
Tools Used In Work A taxpayer can deduct amounts spent for tools used in a taxpayer's work if the tools wear out and are thrown away within 1 year from the date of purchase. A taxpayer can depreciate the cost of tools that have a useful life substantially beyond the tax year.
Mortgage Interest Points Points paid on a home mortgage are usually deductible as interest. If the mortgage is for the purchase or improvement of your principal residence, you can either deduct the full amount of the points in the year of payment or, if you're not itemizing your deductions that year, pay back the points over the loan term.
Retirement Plan One of the most powerful tax shelters available is a qualified retirement plan. Within certain limits, contributions to fund the plan are immediately tax deductible, plan investment earnings are tax deferred, and plan participants do not have to pay income taxes on benefits until they receive their distributions.
Business Tax Tips
Hiring Your Children: If you use part of your home regularly and exclusively for administrative, managerial and other business-related activities, you can claim a home office deduction. Expenses that qualify include utilities, rent, mortgage interest, depreciation and cleaning. Overall, the deduction is based on the square footage of the home used for the business.
Business Use of a Home: If a client uses part of his home regularly and exclusively for administrative, managerial and other business-related activities, he can claim a home office deduction. Expenses that qualify include utilities, rent, mortgage interest, depreciation and cleaning. Overall, the deduction is based on the square footage of the home used for the business. Automobile Expenses: If your client travels for business purposes, he may deduct the dollar value of miles traveled, even for short distances. He can claim the actual expense incurred or use the standard mileage rate prescribed by the IRS, which is 54 cents in 2017. However, be sure to advise your clients that the IRS allowable mileage rate may change from year to year. Air, bus and train fares related to work also can be written off. Health Insurance Premiums: Self-employed clients are allowed to deduct what they pay for medical insurance for themselves and their families, and it doesn’t matter if they itemize. It also doesn’t matter how high their income is, but remember that they are not allowed to take this deduction if they are eligible for health insurance through a spouse’s job. Self-Employment Taxes: Clients have to pay the full 15.3 percent self-employment tax to cover Social Security and Medicare, but they are allowed to write off one-half of what they pay. Just as with health insurance premiums, they do not have to itemize in order to qualify for this deduction.