Overlooked Deductions

Deductions are the key to reducing your taxable income. They’re easy to overlook – you won’t get a notice in the mail about any of them – but these will help reduce the amount of money that you will need to pay in Federal taxes.
Tax law is constantly changing. My staff and I are always keeping track of new legislation that affects taxes. We will post deductions on this page to keep you informed.

1. Itemized Deduction vs. Standard Deduction

Starting with the 2018 Taxes, the Standard Deduction is now $12,000 for a single person and $24,000 for a married couple. It may be beneficial to take the higher standard deduction. However, I recommend that you keep track of your itemized deductions each year, even with the increased standard deduction. A lot of factors are involved in deciding whether to itemize your deductions. It’s always best to consult your Tax Advisor (like Taxman & Associates!) for Tax Planning. Following are some ways to get the most out of your itemized deductions:

2.  Sales Tax Paid

If you live in a State that does not have an Income Tax, taxpayers who itemize are allowed to deduct Sales Tax paid over the year.  You can use the IRS table, or you can use the actual amount of Sales Tax paid.  Since most of us use credit cards for many purchases, it’s a deduction that you can track to save you thousands of dollars in tax.

All taxes paid are now limited to $10,000 per year.

3. Vehicle Excise Tax

If you get a bill every year from your state or local government charging you a tax for owning a vehicle, you may be able to deduct that tax. You can also get the tax deduction if you lease a vehicle and your finance company bills you for the tax. The rule is that you can deduct the tax if it depends on the value of your vehicle. If you’re not sure how the tax was calculated, ask your local tax authority.

All taxes paid are now limited to $10,000 per year.

4. Real Estate Taxes

Real estate taxes are deductible. Don’t forget taxes you paid indirectly, such as taxes paid through a mortgage escrow account. If you bought a house, check your settlement statement for any taxes for which you reimbursed the seller at the closing. These taxes are deductible, too.

All taxes paid are now limited to $10,000 per year.

 

From Last Year´s Return

Always have last year’s Federal and State Tax Returns handy when you’re doing your taxes. There are a number of items which can save you money if you know where to look.

5. Capital Loss Carryover

If your capital losses are greater than your capital gains, you won’t have to pay tax on the capital gains. You can also deduct up to $3,000 ($1,500 if married filing separately) of the capital loss, offsetting other income you may have. Any losses above the cutoff are called a capital loss carryover and are treated as a capital loss on the next year’s return. So if you have a capital loss one year and a capital gain the next year, remember to use your capital loss carryover to reduce your taxes in the later year.

6. State Tax You Paid in April With Your Return

Did you owe taxes when you filed your 2018 State Tax Return? That check you wrote in April can help you when it’s time to pay your 2018 taxes. State income taxes are deductible in the year they’re paid, but a lot of people forget about that April tax payment when they’re doing their taxes for the next year.

All taxes paid are now limited to $10,000 per year.

 

Other Items

7. Reinvested Dividends

Often a mutual fund account is set up to automatically reinvest dividends in additional share purchases. When you get around to selling stock that was purchased this way, your basis – the amount you subtract from the sales price to figure your gain or loss – should include these reinvested dividends. It’s up to you to keep track of the reinvested dividends unless your fund does it for you.

8. Credit for Excess Social Security Tax

If you work for more than one employer during the year, look into the credit for excess Social Security tax. Each employer you work for will withhold Social Security tax as if you didn’t work for anyone else. Once your wages reach the Social Security limit – $132,900 in 2019 – any Social Security tax withheld after that is treated as a credit against the regular tax you owe for the year.