Enter The Formula That Will Calculate The Total Projected Revenue The Five Overlooked Income Tax Breaks That Might Save You Money

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The Five Overlooked Income Tax Breaks That Might Save You Money

Tax season is in full swing! In general, there is very little to be happy about this time of year. Unless, of course, you take steps to maximize your tax deduction so you can get as much money as possible in April.

1. Health-Related Contributions

If you use a high-deductible medical insurance policy, then you or your employer will set up a Medical Care Flexible Spending Account (FSA) or Health Savings Account (HSA) to which you will add regular payments. These savings accounts are great because all deposits are viewed as an above-the-line IRS write-off. The highest tax-deductible payments for last year were $3,050 for individuals and $6,150 for families (and a $1,000 restriction for catch-up deposits). You must report your tax-deductible HSA contributions on IRS Form 8889 and full contributions on Form 1040. Keep in mind that insurance vendors report your FSA/HSA contributions to the IRS with Form 5498-SA.

2. Using your personal vehicle for business

Although you can’t deduct the cost of commuting back and forth from your home to your job (the IRS considers “personal” travel expenses to be commuting), you can write off business-related vehicle transportation. If you drive your own motor vehicle in the course of your work (eg, to reach clients, travel between multiple office locations or non-permanent job sites), you may meet the criteria. There are two basic ways to cut costs:

-Actual Expense Technique, which allows you to deduct actual automobile expenses from the past year.

or

-The standard mileage rate approach, which is often used as a substitute for actual expenses, represents the average cost of operating an automobile. For 2011, the standard mileage rate is: 51 cents/mile (January 1 through June 30, 2011), and 55½ cents/mile (July 1 through December 31, 2011).

Generally, if you are using a newer model car for business travel, the actual expense approach will give you a higher write-off, as you are able to deduct the actual cost of ownership, including depreciation, lease expenses, etc. If you drive your vehicle for both business and personal travel, you can only write off work-related expenses; Therefore, it is important to keep details about these travel expenses. The laws governing this write-off are often complex, so consult a tax professional for details.

3. Write down the start-up expenses of your business

Almost all people emphasize the small business tax write-off on the companies they are currently working for. However, there is a deduction for those who are just starting their companies. Money spent to create a company from the beginning is classified as “capital expenditure”. These types of expenses can include costs for putting together a business office, travel, marketing and advertising, and so on. Many people mistakenly assume that capital expenditures are not tax deductible. However, they are under the condition that most of these expenses should be amortized. For 2011, you can write off about $5,000 in capital start-up expenses (more than $5,000 in other long-term expenses to be amortized and distributed in future years). If you start a home business your expenses may not exceed $5,000, making this write-off especially useful.

4. Career search costs

The Internal Revenue Service has an entire section dedicated to income tax tips for unemployed people. For example, you can find tips on how to deduct job search expenses on your 2011 tax return.

In fact, if you’ve been out of a job and/or looking for a new job, you may be in a position to write-off a portion of your expenses (see Form 1040 Schedule A for more details). However, not every expense related to a job search is deductible, as many qualifications exist. Mainly among them, your expenses will be necessary for finding an occupation within your current occupation; Career search costs outside of your current occupation will not be tax deductible. Next, it is possible to write off some employment-related resources, such as recruitment agency costs, but again, your search should be within your existing profession. Plus, you can deduct the amount you spend editing and sending your resume to potential employers. Finally, you may be eligible to deduct ongoing expenses for traveling to find work, but only if the travel is primarily for that purpose.

It’s also important to note that, in order to receive the job search tax deduction, your work-related expenses must exceed two percent of your adjusted gross income (AGI). Keep in mind that the IRS does not give search-related tax deductions if a long time has passed between the last time you were employed and the time you started looking for work. Additionally, the job search tax deduction will not apply to first-time job seekers. Last but not least, if you receive unemployment benefits, or receive funds from any other source, the government may well count this as income that must be reported.

5. State Tax: Income vs. Sales

In many states, you are expected to pay state and local excise taxes, or state and local product sales taxes. Choosing an income tax write-off is usually too big for most of us because this tax is more expensive than sales tax in many places. However, don’t be fooled into selecting state income taxes by default. In the event that you purchased an expensive item last year, such as a car/truck, or any other big-ticket item, you should consider it in your sales tax formula. For many people, choosing the sales tax option means more money in their pocket than using the income tax. You should work with the sales tax calculator supplied by the IRS (on their website) to help you determine which tax deduction is correct.

Yet another valuable tax consideration: This is actually related to your 2012 taxes. It is important to file a new W-4 form with your employer immediately. Here’s why it’s important: Payroll withholding is calculated by your W-4 form, and determines the amount of each paycheck paid to the federal government. For most people, how much we receive in our paycheck is not the most valuable amount to us. how is that Once you receive a tax refund, it means the IRS has taken an excess amount from each payroll check. Most of us expect to receive some of that cash for the entire year, when we actually get it. Similarly, if you owe the IRS, this indicates the IRS is keeping very little money from your paycheck. Very few people want to pay back in a single size check each year. Filing the latest W-4 allows you to re-establish how much the IRS should have received from each paycheck. For example, for those expecting a refund, changing your W-4 means extra cash in every single pay check. And if you anticipate that you will need to pay taxes, revising your W-4 will mean less income in each payroll check, but also less worry come tax season.

When should you report a new W-4? do it today First of all, because Congress approved a tax-extender bill that led to a reduction in Social Security taxes that could save two percent of your paycheck (it may not seem like much, but a little is better than nothing). And in addition, if you’ve had a child, a home loan, or a divorce since you filed your last W-4, you’ll need to update your tax withholding amounts, and extend those income tax deductions throughout the year.

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