According to recent IRS data, in a calendar tax year, about 45 million Americans claimed more than $1 trillion in itemized deductions when preparing their tax returns. Another estimated 92 million taxpayers claimed $700 million through standard deductions. From these figures, it’s easy to see that spending extra time reviewing your expenses during tax season is a wise investment. As you sit down to do your 2013 returns, don’t forget these five deductions that can yield a bigger refund.
If you are self-employed, you can use your home office as a business expense. The size of the deduction depends on the size of the space. For example, if your office is 10% of your home, 10% of your annual electricity bill is tax-deductible. Other deductions if you are self-employed include baggage fees incurred during business travel, and possibly health and dental insurance. As always, check with your tax preparer on these and any others.
Investment and Tax Expenses
Many people don’t realize that their investments count as miscellaneous itemized expenses, as long as the total exceeds 2% of your adjusted gross income (AGI). Items in this category include employee business expenses; tax preparation fees; and costs associated with tax planning, legal consultation or accounting. Consider the cost of investment publications purchased and software or online services you use to manage your investments. These things add up!
Casualty, Disaster, and Theft Losses
Unfortunately, many New Jersey residents have been the victim of theft or a natural disaster, most notably Hurricane Sandy. If there is any silver lining, it may be that these losses can be claimed on your tax return. This applies to residents of cities or counties that have been declared federal disaster areas, too. Those who have been reimbursed by an insurance company can also claim any difference between what you receive from the insurer and the true value of the item.
If you have recently taken advantage of historically low mortgage rates, any points paid can be deducted on a monthly basis over the life of the new loan. So, if you refinanced to a 20-year mortgage on June 1, 2013, seven of the 240 months passed before Dec. 31, 2013. If you paid $2,400 in points, you can write off $70 ($10 per month) for 2013. You can claim $120 each year thereafter until the points have been deducted in full.
Noncash Charitable Contributions
When you make a noncash donation to charity, the value of your items, such as clothes, electronics and furniture, is deductible. Remember to get a written receipt so you have proof in case of an audit. A good rule of thumb is, “no receipt, no deduction.” If you didn’t get a receipt but still want to itemize the donation, visit your local thrift shop to view the prices of comparable items. The Salvation Army also has a value guide that you can use.
These are just a few examples of commonly overlooked tax deductions. Tax exceptions and laws change each year, and from state to state. So, it is important to always consult with your tax preparer before making any claims or deductions.
These tips may help you get a bigger tax refund. To make that money grow even more, it’s wise to deposit it into an interest-bearing account, such as savings, money market, or certificate of deposit (CD). Visit the NVE website, one of our convenient neighborhood branches in Bergen County, or call 1-866-NVE BANK to learn more.