Filing your taxes can be a daunting task. We gathered tips to help you increase your deductions and your tax return. While some of these deductions may not apply to you this year, they are important to keep in mind when preparing for next year’s tax season.
As you may know, cash donations to charities are typically tax deductible, but have you ever donated clothes or furniture? If so, you are also eligible for a tax deduction for those non-cash items as well. You must obtain a receipt from the Salvation Army, Goodwill, or other donation center upon dropping off your donation. Read what the IRS has outlined about Charitable Contribution Deductions for complete details.
Points on Refinancing
Have you refinanced your house? Any points you pay to refinance your home can be deducted on a monthly basis over the life of the new loan. For more details on what can be deducted, check out the IRS Home Mortgage Points section of their website. Have you been thinking about refinancing your home, but have not yet? Learn how the Mortgage Department at Mariner Finance can help you here!
Job Related Expenses
Were you successful in your job search this past year? Even if you weren’t, you could possibly have multiple tax deductions related to your job search. For example, if you used an agency, purchased new clothes for an interview, or mailed copies of your resume, you could qualify for tax deductions. In order to qualify, your expenses must surpass two percent of your adjusted gross income. Keep in mind the Job Search Expenses that can be Tax Deductible do not include people searching for a first time job, but instead those looking for another job in their field. No worries first timers! Did you move in 2014 for your first job? See if you qualify for the Moving Expenses deduction, and if so, fill out this form.
State Sales Tax
Back again for your 2014 tax return is the sales tax deduction. While this deduction does not always happen, due to Congresses rulings, this deduction is good for 2014. Itemizes must choose between deducting state income tax or states sales tax, but not both. This deduction is great for people who file in states that do not have an income tax and they can write-off sales tax instead. Use the Sales Tax Deduction Calculator to figure out your deduction.
Higher Education Expenses
Did you go back to school in 2014? Regardless of your age, you can possibly make this tax deductible. This deduction includes community college and college classes you may take during your retirement. To see if you meet the IRS criteria for the Lifetime Learning Credit, check out the details here. Did you just get out of school and are paying off your student loans? You could be eligible for the Student Loan Interest Deduction if you meet the requirements listed.
Energy-Efficient Home Improvements
Being energy-efficient is great because it can save you dollar-for-dollar deductions on your tax form. A 10% credit up to $500 is applicable for any skylights, outside doors, windows, pigmented roofs, high-efficiency furnaces, water heaters, and central air-conditioning units installed in your primary residence. Homeowners who install alternative energy equipment, such as solar water heaters, geothermal heat pumps, and wind turbines can take a credit of 30% of the total cost, with no cap through 2016. For more details and to see if you can make this deduction, check out the IRS qualifications in the Tax Credits Available for Certain Energy-Efficient Home Improvements.
You could be eligible for even more tax deductions this season. Are you in the military?; Did you fly somewhere and pay a baggage fee?; Or did you pay for child care? These deductions and more are explained in Kiplinger’s article, The Most Overlooked Tax Deductions, to help get you the most money this tax return season. If you did your taxes and are still in need of extra funds, Mariner Finance can help. Apply online or visit your closest branch today!
Tax Hacks 2016: Avoid These 10 Common Filing Mistakes
Mistake No. 1: Paying for tax preparation when you could get it free
Would you pay a couple hundred bucks for something you can get for free? Millions of Americans do it every year.
Depending on your income level, you may qualify for any number of free services.
- Volunteer Income Tax Assistance: Sponsored by the IRS, VITA offers free tax preparation by trained volunteers. You may be eligible for the VITA program if your income is $54,000 or less, you have a disability, are elderly or have limited English-speaking ability.
- Tax Counseling for the Elderly: Also sponsored by the IRS, the TCE program is intended for people age 60 and older.
- Free File: If your income is less than $62,000, you can use an online software program to prepare and file your federal income tax return for free.
- Free online filing: Many large software providers offer free electronic online filing for simple returns, often including state returns.
For a list of software providers, head to the Free File website. If you’d rather have face-to-face assistance, you can find a list of VITA and TCE sites on this IRS webpage. For free online filing, our favorite is TaxAct.
Mistake No. 2: Getting your Social Security numbers wrong
On its list of common tax mistakes, the IRS puts wrong and missing Social Security numbers at the top.
Long gone are the days in which you could claim dependents without a Social Security number. Today, every member of your household listed on your return needs to have one. Make sure to double check all the numbers before submitting your return to ensure there aren’t any transposed or missing digits.
Mistake No. 3: Spelling your name wrong
Sure, you know what your name is, but maybe you’re typing too quickly and hit a wrong key. Or you could be interrupted while filling out the form and pick back up at the wrong spot. There are plenty of scenarios in which people can, and do, misspell their names on their income tax forms. Those simple errors can lead to rejected returns and delayed refunds.
In addition, if you recently married or divorced and haven’t registered a name change with the Social Security Administration, be sure to use your old name. You need the name on your forms to match the name listed in Social Security records.
Mistake No. 4: Making math errors
This becomes less of a problem if you use software to prepare and file your taxes. The computer will do all the calculations on your behalf, which virtually guarantees you’ll get it right.
However, the computer can’t know whether the numbers you’ve entered are correct. Double check everything to be sure your return is completely accurate. It should also go without saying that if you’re still doing a paper return, use a calculator and do the math twice to confirm the results.
Mistake No. 5: Forgetting your John Hancock
There are two places this mistake can trip you up.
This first is by failing to sign a paper return before mailing it. The second is failing to sign your check if you’re sending in a payment. Either one can result in lengthy delays in processing your return.
You can avoid this mistake by filing and signing your return electronically and having tax payments directly withdrawn from your bank account. Saves on postage, too.
Mistake No. 6: Using the wrong tax form
Most mistakes have the potential to affect how quickly the IRS processes your return and issues your refund but don’t necessarily affect your bottom line. But using the wrong tax form could mean lost dollars.
If you use the 1040EZ form, you get the standard deduction. For most people, in 2014, that amount is $6,300 for singles and $12,600 for couples filing jointly. This deduction is subtracted from your income so you don’t have to pay taxes on that amount.
However, if you have deductions that could exceed these amounts, you may be better off using a regular 1040 form so you can itemize. Typical deductions for those who itemize include mortgage interest, home office deductions, significant health care expenses and charitable contributions,
Mistake No. 7: Selecting the wrong filing status
Another costly mistake can be selecting the wrong filing status. This mistake may be most common for single parents.
For example, unmarried parents who have a qualifying dependent and pay more than half the cost of keeping a home may be able to file as a head of household, a status that boosts their standard deduction by nearly $3,000. In addition, you can be considered unmarried so long as your spouse did not live with you for the last six months of the year.
Meanwhile, widows and widowers can still use the “married filing jointly” status for the year in which their spouse died. Then, if they have dependent children, they may be able to file as a “qualifying widow(er) with dependent child” for two more years, a status that allows the same standard deduction as those who are married and filing jointly.
Mistake No. 8: Missing deductions or credits
It’s not enough to simply use the right form and the right filing status. If you want to maximize your refund, you also need to take advantage of every tax deduction and credit available to you. There are plenty of credits and deductions that have the potential to reduce your tax liability by thousands.
Your tax software or tax professional should help ensure you don’t miss anything you’re entitled to, but here are a few of the bigger credits and deductions you don’t want to miss.
- American Opportunity Tax Credit: Available to college students of all ages, this credit is based upon college expenses and can provide up to a $2,500 tax reduction per year for four years.
- Earned Income Tax Credit: Offered to low-income families, this credit is refundable, which means the government will send you cash even if you don’t owe any taxes. Sometimes this is overlooked when eligible families have incomes so low they aren’t required to file returns, so they miss out on claiming the credit.
- Child and Dependent Care Credit: If you pay someone else to watch your children while you work, you may be able to claim a credit. Depending on your income, you could get a credit of up to 35 percent of qualified expenses up to $6,000.
- State Income or Sales Tax Deduction: You can deduct state income tax you paid from your federal return. If your state doesn’t charge an income tax, you can use the amount you paid in state sales tax instead.
- IRA Contributions: While contributions to Roth IRAs are not deductible, depending on your income and whether you have a retirement plan at work, you can deduct up to $5,500 if you put money in a traditional IRA. If you’re age 50 or older, the limit is increased to $6,500.
Mistake No. 9: Failing to claim all your income
You might also make the mistake of thinking you don’t need to claim income unless you receive a W-2 or 1099 form. You’re supposed to claim all income for the year, including side jobs, gambling winnings and just about any other way you’ve made money.
Here’s what the IRS says (you can read more here):
While most people are aware they must include wages, salaries, interest, dividends, tips and commissions as income on their tax returns, many don’t realize that they must also report most other income, such as:
- cash earned from side jobs
- barter exchanges of goods or services
- awards, prizes, contest winnings and
- gambling proceeds
Cheating Uncle Sam may seem like a victimless crime, but you’ll feel victimized if you’re ever audited.
Mistake No. 10: Sending your return through the mail
If you insist on being old school and sending your return through the mail, you’re making the last mistake on our list.
Filing through the mail is a mistake for many reasons. First, if you’re filing a paper return, you increase your chances of making one of the other mistakes listed above. Using software means lower odds of missing Social Security numbers, forgetting to sign your return and making math errors. In addition, a good software program will help you root out deductions and credits you may otherwise miss. It should also guide you to the right filing status.
Also important, filing electronically means you could have your refund cash in hand much sooner. In 2015, 91 percent of returns were e-filed. If you’re not already e-filing, it’s time to get on this bandwagon.