Thursday, March 20, 2014

Nifty Ways to Save on 2014 Taxes

With tax season almost upon us, I thought you'd enjoy this guest post on ways to help you save more money on your taxes.

Tax season can be nerve wracking regardless of which tax bracket you fall into. Between collecting receipts, filling out the forms and poring through the tax codes it’s enough to make your head spin. Fortunately, there are a few easy-to-implement methods to receive a slightly higher refund this year.

Assess Your Status

Depending on your marital status and qualifying dependents, you may be able to adjust your filing status. The five main categories are single, married filing jointly, married filing separately, head of household, and widow/widower with a dependent. If you've recently gotten married or separated for that matter, take the time to confirm your status. Those who are still unsure which category they fall into can take a quick quiz made available by the IRS.

 Save Green by Going Green

It’s no secret that going green greatly benefits the environment, but did you know it can also equate to big refunds? The IRS grants six main energy tax credits.

  • Residential Energy Property Credit — Homeowners can receive this credit if they've made qualified energy improvements to the residence. In all, the credit amounts to 30 percent of the total cost, with the maximum capped at $1,500. Qualifying improvements include heating and air conditioning systems that meet energy-efficient standards, insulation, and energy saving windows.
  • Residential Energy Efficient Property Credit — Taxpayers who have installed energy efficient equipment within their homes can receive 30 percent of the total cost. What’s considered energy efficient equipment? Things like solar water heater, solar panels or other electricity equipment, wind turbines, and geothermal heat pumps. For a full list of approved equipment, refer here.
  • Plug-in Electric Drive Vehicle Credit — The American Recovery and Reinvestment Act (ARRA) of 2009 adjusts the credit for plug-in vehicles purchased after Dec. 2009. For qualified vehicles, you can receive a minimum $2,500 and a maximum credit of $7,500. One of the factors that will impact your credit is the battery capacity. One extension to the plug-in vehicle credit is if it’s a certain low-speed electric vehicle or two/three-wheeled. Purchases on these types of vehicles made after Feb. 17, 2009 but before Jan. 1, 2012 may receive 10 percent of the cost up to $2,500.
  • Conversion Kits — A conversion kit, transforming a vehicle to one of the aforementioned plug-in vehicles, will make you eligible for a credit equal to 10 percent of the cost.
  • As of 2009, based on specifications in the ARRA, you can now apply the credit towards purchasing hybrid vehicles against the Alternative Minimum Tax. That means consumers can use the Alternative Motor Vehicle Credit to offset the Alternative Minimum Tax—something that was not possible prior to 2009.

Overlooked Deductions

Taxpayers often overlook some pretty lucrative deductions. Say you've spent a large portion of the year job hunting. You can deduct some of the expenses associated with the employment search. Things like business cards and even travel expenses can be included. Charitable deductions are also a big write-off, however you’ll need the organization to approve it if the sum exceeds $250. Finally, if you incur expenses on the job and are not reimbursed by your employer, you may be able to deduct it. The same applies for professional organization membership fees. Lawrence Levy, from Levy and Associates, adds a few more noteworthy deductions including the deduction of fitness expenses necessary to combat a medical condition, and even clarinet lessons to repair an overbite! The second one is a bit wacky, but nevertheless it’s legitimate! Consult an IRS tax help specialist for even more ways to increase your refund in 2014.

See my disclaimer.

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