It is March 17, 2014, you have exactly one month to procrastinate before you have to file your tax return. I thought it would be nice if I listed the most common overlooked tax deductions, as you burn the midnight oil.
STATE AND LOCAL TAXES
You can deduct your state, and local taxes on Schedule A of Form 1040. If you live in a state such as Florida, then you to deduct sales tax, instead of state and local taxes. Even if you live in a state that has a state income tax, you can deduct sales taxes or state and local taxes. Whichever amount is higher.
If you are an educator, you can deduct $250 as an above the line deduction, not needing to itemize to take it. If you spent in excess of $250, which most educators do you can still deduct this amount on Schedule A as a miscellaneous itemized deduction, subject to the 2% floor. This can be a very powerful tax deduction, so don’t lose out.
SPECIAL EXCLUSION OF INCOME ON FORECLOSURES AND SHORT SALES
Typically, if a debt is forgiven from places like a credit card company, you have to claim the amount is income. This is true of foreclosures and short sales. The amount that the mortgage company forgives, is taxable to you. However in 2007, a law was passed allowing for the exclusion of income from foreclosures and short sales. You can also exclude the cancellation of debt, if you are insolvent. That means you owe more than your worth. All you have to do is fill out a special form. I have saved clients thousands of dollars because I knew this rule.
ROLLOVER OF AN IRA TO CHARITY
In theory, this will be the last year, that you can write off a direct rollover of an IRA to charity. I say, in theory, because this is been on the chopping block every year since it was introduced. If you made a direct rollover to a charity of your IRA, 401(k), 403(b), or pretty much any retirement account, you can write it off as a charitable deduction.
These are just some of the most common overlooked tax deductions.
Craig Smalley is the managing partner of CWSEAPA®, LLP, which is an accounting and financial firm located in Delaware, Florida, and Nevada. Craig has been Admitted to Practice Before the Internal Revenue Service, is a Certified Estate Planner™, and is a Certified Tax Resolution Specialist™. Craig specializes in taxation and IRS representation all the way through the United States Tax Court. Form more information visit www.cwseapa.com, call 1-844-CWSEAPA, or email him at email@example.com
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