“People who complain about taxes can be divided into two classes: men and women.” —Author Unknown
The author of this quote may be unknown, but what we do know is it communicates an important message: you are not alone! Few people, if any, enjoy doing (or paying) taxes, but it is one of two certainties in life – death being the other. To make it as painless as possible, follow these tips so you get every penny you deserve.
Don’t Miss Easily Overlooked Deductions
There are no new deductions for 2014, but some existing ones can go unnoticed. So can “tax extenders” that Congress retroactively passed at the end of last year. Keep in mind that these aren’t applicable for 2015 unless Congress renews them.
Health Insurance Premiums. The self-employed can deduct health insurance premiums, such as medical, dental and long-term care, as long as they are paid by the individual, a spouse and dependents, according to the Internal Revenue Service.
Mortgage Points. You might be thinking, “of course I know about mortgage interest deduction.” What you may not realize is that points paid to lower your interest rate are deductible, as well.
Bonus Depreciation. Good news for small and mid-size New Jersey business owners: you can write off 50 percent of corporate assets purchased in 2014. You can also deduct up to $500,000 of qualifying assets, up a whopping $475,000 due to a Congressional tax extender.
Ask your tax preparer if you qualify for these deductions. If so, you could benefit from substantial savings.
Avoid Common Pitfalls
According to the IRS and Turbo Tax, the most common tax-filing mistakes are avoidable: math errors, illegible social security numbers and unsigned/dated forms. This may be, in part, because many Americans wait until the last minute to prepare their returns and rush through important details. Try to avoid common errors by following this advice.
Embrace your inner abacus. According to Bankrate, the most common error on tax returns is bad math, followed closely by computation errors. If you’re self-preparing your taxes, double- and triple-check everything with a calculator or Excel spreadsheet. Math errors are even possible when using an automated, electronic tax filing program, so make sure everything you’ve entered is accurate before relying upon a computer system to calculate your tax information.
A family affair. If you are filing with other family members, everyone must agree on their respective filing status or confusion can ensue. For example, multiple people may claim the same dependents, or one partner may file “married, filing separate” while the other files “married, jointly” or “single.” Non-minor children may file their own taxes, while their parents are still claiming them as dependents. Sit with family members to determine a joint approach. If you have questions or disagreements, seek help from a professional tax preparer.
Devil in the details. Once the “hard part” is done, there are a few crucial components to make sure your taxes are properly signed, sealed and delivered.
• Sign and date all relevant forms. Not endorsing tax filings is ultimately the same thing as not submitting them at all.
• Don’t miss the deadline! Mailed tax forms must be postmarked (officially stamped from the Post Office) no later than April 15th. Electronically submitted tax forms must be submitted on or before 11:59 p.m. on April 15th.
• If you are concerned about the deadline, extensions can be granted, but these requests must also be made no later than April 15th.
Cash in on the Perks of Being a Homeowner
Building equity, having creative freedom, and independence are among the advantages of homeownership. Another big benefit is tax breaks. Here are three tax deductions for homeowners that could lower what you owe by thousands of dollars.
Big Mortgage=Big Deduction. Homeowners can deduct the interest paid on up to $1 million of principal on their mortgages. For owners of more expensive homes—like many here in Bergen County—this means a big tax advantage. Given current interest rates, a home with a $1 million mortgage could yield a tax deduction as large as $45,000 in the first year. Even a $100,000 mortgage at 4.5% interest will reap a $4,500 deduction against your income! Anyone who has paid mortgage interest in the past year can deduct it.
Insurance Pays Off. If you’ve been paying private mortgage insurance (PMI) every month because you put down less than 20% on your home, you may be able to get some of that money back by claiming it on your 2014 federal return. You qualify for this deduction if you received your loan in 2007 or later, your mortgage is for your primary residence or a second home that’s not a rental property, and your adjusted gross income (AGI) is $109,000 or less. One final qualifier is that you can only deduct your mortgage insurance if you itemize deductions. The IRS instructs taxpayers to treat mortgage insurance the same as mortgage interest.
Property tax treasure. As a homeowner, as long as you itemize your deductions, you may claim property taxes as a write-off. There is no limit to the amount of taxes eligible for the deduction. This applies to your primary residence and any secondary properties you own. If you pay real estate taxes through you mortgage company, as many do, reference the tax form your lender supplies to find your deductible tax amount.
Bonus tip. If your deductions total more than the standard deduction every taxpayer receives, which is usually the case if you’re a homeowner, you may benefit from filing itemized deductions. It may take a bit more time, but it could be worth it.
Tax exceptions and laws change each year, and from state to state. 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 (683-2265) to learn more.