FOX40's Certified Financial Planner Kimberly Foss from Empyrion Wealth Management in Roseville has a list of tips that will make life easier come tax season.
Little things add up
You can write off out-of-pocket costs incurred while doing work for a charity.
- For example, ingredients for casseroles you prepare for a nonprofit organization's soup kitchen
- Stamps you buy for a school's fund-raising mailing count as charitable contributions. Keep your receipts. If your contribution totals more than $250, you'll also need an acknowledgement from the charity documenting the support you provided.
- If you drove your car for charity in 2015, remember to deduct 14 cents per mile, plus parking and tolls paid, in your philanthropic journeys.
Write off Student Loan Interest
- Generally, you can deduct interest only if you are legally required to repay the debt.
- If parents pay back a child's student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt.
- So as long as the child is no longer claimed as a dependent, they can deduct up to $2,500 of student-loan interest paid by Mom and Dad each year. And he or she doesn't have to itemize to use this money-saver.
Saver's Tax credit
- If you are single and have adjusted gross income of $30,500 or less, or you are married and have AGI of $61,000 or less, you can make out even better on a retirement contribution through the Saver's Tax Credit.
- You can claim a tax credit worth 10% to 50% of the amount you put in, up to a maximum credit of $1,000 ($2,000 for joint filers). 401(k) or 403(b), Traditional, Roth or SEP IRA, are eligible for this credit.
- The lower your income, the higher the percentage you get back via the credit. Some key exceptions: Taxpayers under age 18, full-time students and those claimed as dependents on their parents' returns are not eligible, regardless of their income.
- And here's the beauty of a credit compared with a deduction: While deductions reduce the amount of your income that can be taxed, credits reduce the amount of tax you owe -- dollar for dollar. You'll need IRS Form 8880.
Self Employed -- Deduct Medicare Part B & D
- Folks who continue to run their own businesses after qualifying for Medicare can deduct the premiums they pay for Medicare Part B and Medicare Part D,
- Plus the cost of supplemental Medicare (medigap) policies or the cost of a Medicare Advantage plan. This deduction is available whether or not you itemize and is not subject to the 7.5% of AGI test that applies to itemized medical expenses.
Save on Solar until 2016
The law offers a powerful incentive for those who install qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. Your credit can be 30% of the total cost (including labor) of such systems installed through 2016.