By Mark Buescher, C.P.A.
If you have driven by our office on Range Avenue recently, you have probably noticed the lights on until eight or nine o’clock each evening. The reason is obvious – it’s tax season. It’s the time of year that everyone is frantically gathering up last year’s income and expenses in order to file their tax returns.
North Floridians are like everyone else. We all want to save money when it comes to filing our income taxes. Even though 2011 has past, you may still be able to trim your tax bill this year.
The 2011 Form 1040 reflects a number of new tax breaks along with some of our old favorites. Some are straightforward. Others are complex. But they all provide an opportunity to save money. Here are a few reminders.
First, consider maximizing your 2011 IRA contribution. You have until April 17, 2012, to make deductible 2011 contributions. The maximum 2011 contribution is $5,000. But if you were age 50 or older last year, you can contribute up to $6,000.
Look into itemizing deductions if you usually take the standard deduction. Search for allowable deductions that you might have overlooked, such as the restored deduction for state and local sales taxes. Since Floridians generally pay no state income tax which would be deductible in lieu of the sales tax, the deduction for sales tax is even more valuable.
Medical deductions are allowable to the extent they exceed 7.5% of adjusted gross income (AGI). Don’t forget items such as eyeglasses, hearing aids, and even Lasik eye surgery. Also, you can deduct mileage for 2011 medical appointments at 19 cents per mile through June 30, 2011 (23.5 cents per mile after July 1, 2011), plus parking and toll fees.
Other items you do not want to overlook include tax preparation fees, safe deposit costs, and certain investment advice. They all qualify as miscellaneous itemized deductions, subject to a two-percent AGI limit.
There are several types of deductions for education expenses that are often overlooked. One of the biggest is student loan interest. Up to $2,500 of student loan interest is deductible whether you itemize or not.
Another education related provision available for 2011 is the deduction of up to $4,000 for qualified tuition and school expenses. This deduction was slated to expire but was extended through the Tax Relief Act passed in December 2010. Qualifying amounts for you, your spouse, and dependents may be deductible, subject to income limits.
If you’re a teacher or teacher’s aide, you can deduct up to $250 for classroom supplies, including computers and accessories, that you purchased with your own money. This deduction was recently extended as well.
If you made energy-saving improvements to your home, check into the credit of up to 10% of your cost (30% of certain types of solar and wind energy systems). Although this credit was recently extended, it is subject to a $500 limit for amounts spent in 2011. But keep in mind, a credit is more beneficial than a deduction. A credit is a dollar for dollar reduction of your taxes.
For those of you who changed jobs in 2011, make sure you didn’t have excess social security taxes withheld. You may claim a credit for the excess on your Form 1040 if you paid over $4,486.
Also, do not forget several new benefits available through the health care legislation passed in 2010. For 2011, a self-employed person who paid for health insurance may be able to include in his health insurance deduction any premiums paid to cover his child who was under age 27, even if the child was not his dependent.
Another benefit under the new health care law is the small business health insurance credit. The new tax credit is available to eligible small employers who make qualifying contributions to buy health insurance for their employees. In general, the new credit is 35% of premiums paid.
These are just a few basic tax-saving ideas. Opportunities abound if you just dig below the surface.
Mark Buescher, CPA is owner and principal of Buescher and Ruff, LLC, a local full service accounting firm in Madison, specializing in tax preparation, business consulting and audit and assurance services. Tax laws contain varying effective dates and numerous limitations and exemptions that cannot be summarized easily. For details and guidance for your specific situation, contact your tax advisor.