Tuesday Tax Tips 3/12/13

Fiscal Tax cliff at the end of 2012 has many people still wondering what it means to them.  While many issues were resolved, a lot of taxpayers still aren't sure how their tax returns and deductions are affected.  If you're one of those people, brush up on these 13 deductions before tackling your tax return. They are worth reviewing, as they could lower your tax bill.

1. Traditional IRA contributions. You have until April 15, 2013 to contribute up to $5,000 to a traditional IRA for 2012 and, if you qualify, deduct it on your tax return.  There are special guide lines that need to be follow so please contact your local licensed Tax Professional - your Enrolled Agent <http://www.inea.biz/>:

2. Self-Employed retirement plans (SEP IRA).  If you work for yourself, you can open a SEP IRA by April 15, 2013, and deduct your contribution on your 2012 return.

3. Mortgage interest and PMI. You're allowed to deduct mortgage interest and PMI paid on your primary mortgage, as well as home equity loans, home improvement loans and lines of credit.

4. State and County taxes. The federal government generally allows taxpayers to deduct property and income taxes paid to state and local governments.

5. Charitable gifts. Donations to charity may ease your tax burden, but only if you have the right documentation. Cash contributions - regardless of the amount - require a canceled check or dated receipt. Any contribution of $250 or more requires a receipt from the charity organization.  Noncash contributions valued at more than $5,000 generally require an appraisal.

6. College Tax Credits: American Opportunity Credit and the Lifetime Learning Credit.  If you, your spouse, or your child is attending college you can get up to $2500.00 tax credit.

7. Student Loan Interest. Up to $2,500 in interest on loans for qualified higher education expenses may be deductible if your adjusted gross income is less than $75,000 ($150,000 if you're married and filing a joint return).

8.  Indiana 529 College Plan.  State of Indiana gives you a 20% tax credit or up to $1000.00 for funds you put into your children or your grandchildren Indiana 529 College fund.

9. Medical and dental costs. The government sets a high hurdle for these expenses: You may be able to only deduct them if they exceed 7.5% of your adjusted gross income.

10. Health insurance. Self-employed taxpayers get a break on one of their biggest financial headaches. In general, they may be able to deduct all of their health insurance premiums.

11. Health savings accounts. If your family was covered by a high-deductible health insurance plan in 2012, you may be able to contribute up to $6,250 to a health savings account ($3,100 if it only covered yourself). Contributions are deductible, and withdrawals for qualified medical expenses are tax-free. Similar to IRAs, you have until April 15, 2013, to contribute for the 2012 tax year.

12. Job-related moving expenses. If you moved to take a new job, you may be able to deduct your expenses if you pass these two IRS tests:
    Your new job must be at least 50 miles farther from your old home than your old job. If you didn't have a previous job, your new one must be at least 50 miles from your old home.
    You must work full time for at least 39 weeks during the 12 months after you arrive in the general area of your new job.
13. Guard and Reserve travel expenses. If you traveled more than 100 miles to attend a drill and spent the night, you may be able to deduct lodging expenses, half the cost of your meals and 55.5 cents per mile for travel. You also can deduct tolls and parking fees.  This is not part of itemizing.

14. Teacher expenses. Teachers, aides, counselors and principals - kindergarten through 12th grade - are able to deduct up to $250 for classroom supplies purchased in 2012.

15. Stock Sales.  Millions of Americans will enjoy the Zero tax rate on qualified capital gains and dividends for their 2012 tax return. The Capital gain law allows individual to receive dividends and take profit on the sale of long-term assets owned and pay no tax until they are in the 25% tax bracket. To qualify for the zero rate you must have owned the assets over a year and be in the 10% or 15% tax brackets.  For 2012, the 25% tax bracket starts at taxable income greater than $68,000 for married and $34,000 for single filers