Top 10 Tax Tips

1. Information Storage on CD/ Archiving

Everyone is becoming crammed for space. This year your tax information will be stored on CD instead of printed on paper for more convenient storage. We archive all returns for fast retrieval if needed by banks, insurance agents, etc. The fee from the IRS for a previously filed return has increased to $57.

2. Donations

Charitable travel can be deducted at .14 cents per mile. All charitable contributions to a church, school, agency, group, etc. should be backed by a receipt, cancelled check, bank record showing the charity, name, date and amount. If your contribution is $250 or more, you must have written acknowledgement from the organization. A cancelled check is not enough substantiation.

Non-cash contributions can be deducted for donations of furniture, property, cars, etc. A written acknowledgement is required for gifts of $250 or more.

Donations to disaster areas are also 100% deductible. If you drove to help in any of these areas in 2008, the rate increases to 35.4 cents per mile before 7/1/08 and .41 after 6/30/08. See our office for more information on these areas.

3. Misc. deductions

Mileage deductions increased for business and medical travel. Between 1/1/08-6/30/08 business miles get deducted at a rate of 50.5 cents per mile and medical miles are deducted at a rate of .19 per mile. Between 7/1/08-12/31/08, business miles get deducted at a rate of 58.5 cents per mile and medical miles are deducted at a rate of .27 per mile.

State and local taxes are deductible in the year paid if you itemize. Sales tax can also be deducted on motor vehicles, boats, airplanes, homes and home building materials.

Tax preparer fees are deductible if you itemize. These are subject to the 2% of AGI limitation [explain].

Legal fees are deductible for businesses and can be deductible for individuals if attempting to produce or collect taxable income.

All investment expenses are deductible for the collection of income or maintenance of property held, fees for investment advice, books or magazines dealing with investments or taxes, cost of safe deposit boxes, custodial fees for IRAs and SEPs, 50% of meals and entertainment like having lunch with a tax preparer or broker to discuss investments and/or taxes.

Job hunting costs-Expenses of looking for a new job in a taxpayer’s line of work are tax deductible, even if a new job is not found. However, expenses of looking for a new job in a new trade or business are not deductible. Examples of deductible fees include: fees paid to employment agencies and executive recruiters, cost of printing and mailing resumes, legal fees associated with employment contracts, transportation costs to job interviews, long distance phone calls, 50% of meals and entertainment expenses related to job searches.

Work clothes/uniforms are deductible if required as a condition of employment and not adaptable to everyday wear. Shoes, safety glasses, hard hats, work gloves are all included.

4. Filing Status Optimization

We optimize every client so they earn the maximum refund. For example, if you are married and you would gain more or pay less money by filing separately, we would process that for you at NO ADD”L CHARGE.

5. Referral credit

Refer a friend, acquaintance, or family member and you both save $20!

6. Property Tax

Taxpayers who take the standard deduction as opposed to itemizing will receive the benefits of their real property tax deduction. Single taxpayers may take up to $500, $1,000 for joint filers, in addition to the normal standard deduction amounts.

7. Home credits

If you haven’t owned a home during the last three years or are a first time homebuyer, you may be eligible for a credit. The credit applies to homes purchased after 4/8/08 and before 7/1/09. This credit is fully refundable and equals 10% of the purchase price for homes ranging from $75k - $750k. If you file ‘married filing separate’, the credit is half. The credit is actually a loan by Uncle Sam and is required to be paid back over a 15-year period. The repayment period begins in the second year after the year the credit is claimed. This is nothing more than a tax-free loan.

If you put less than a 20% down payment toward buying a home, you can deduct your mortgage insurance premiums. This tax break is phased out for families with adjusted gross incomes between $100,000 and $109,000.

8. Education Credits

Education credits Up to $250 of out-of-pocket costs for books, supplies, equipment and software used for the classroom may be deducted. Additional costs or miles driven may be taken as an itemized deduction if you itemize. For 2008-2009, education credit limits are increased for students attending eligible education institutions in the Midwestern disaster area.

The limit on the amount of higher education expenses that qualify for the Hope Credit is doubled to $1,800 per student.

The Lifetime Learning Credit rate is increased from 20% to 40% of the first $10,000 of qualified expenses (max. credit of $4,000). You cannot claim both the Hope Credit and Lifetime Learning Credit for the same student.

Taxpayers can deduct up to $2,500 of interest paid on qualified education loans.
In addition to tuition and fees, qualified expenses also include room, board and books.

9. Child care credits

Adoption expenses for any child and day care expenses for those under age 13 can be deducted.

Earned income credit kicks in at $8,500 this year.
“Kiddie tax” applies if a child under age 18 has more than $1,800 of investment income for the year.

10. Energy Credit

This credit has been suspended for 2008 and will be reinstated for 2009. Taxpayers can receive a credit for many types of energy saving home improvements which include the replacement of windows, doors, roofing, and certain high efficiency heating and cooling equipment. The allowable maximum credit for all tax years is $500.

Just remember that all returns are retrievable from our archives at any time if we process your tax return.

Keep in mind that in 2008 there were 24 categories of individual tax law changes and 11 categories of business tax law changes. We’ve touched on just a handful of the most common ones. It’s our job to know these deductions and if we don’t, we’ll research it for you. It would take days for individuals to read through all these changes and understand how to report them.

These are general scenarios. Every situation is unique and these tax tips cannot always be applied. Please consult with us for more information.