Year 2013 is gone and 2014 is here, hope this new year place happiness in your life.
Here I want to give you several tips to make your life safe and happy by paying your taxes.
With New Year comes tax return time yet again. Don’t wait till just before the April 15 time limit to prepare your taxes. Now it’s time to take action.
Here are some very useful tips on how to prepare your taxes for 2014 so that you pay not more than you should.
Donate more towards your IRA
If you have an Individual Retirement Account (IRA) like a 401(k) or 403(b), you can decide to donate towards your account up to an upper limit.
Make sure your preservation and see if you are previously donating to the upper limit. If not, you can raise your preservation and donate as much as you can towards the upper limit allowable.
By doing so, you raise the deductible sum from your taxable income and you pay less for this year’s taxes. If you do not have a retirement account, there is still time to set one up.
Work from home
If you are a self-governing business owner of some type, you may want to think moving your procedures to your own house. If you have a room or part of your house that is used as your stable place of business, you can remove 10% of the expenses such as rental, utilities and housekeeping expenses from your taxable income. And you do not automatically have to meet clients at your home office, also. For example, you may be a plumber or electrician that makes house calls.
Claim Energy-Saving Credits
If you improve your home by set up energy-saving equipments such as better insulation, windows or heating, you can claim a Non-Business Energy Property credit for 10% of the cost of such materials (installation costs may not count) up to a $500 lifetime maximum. If you install only windows, the limit is $200.
If you install certain alternative energy producing equipment such as geothermal heat pumps, solar panels and wind turbines, you are allowed to claim 30% of its expenses under the Residential Energy Efficient Property Credit. But be sure to check the manufacturer’s tax credit certificate before making buying of these resources and equipment.
Do not increase 2014 income without need
In efforts to defer paying taxes, many taxpayers would push savings income from this year to next year while claiming deductions this year. But such a move may fail if the tax rates increase in 2014 (which is likely). Tax rates on long-term capital growth and qualified dividends could skip from the current 15% to as high as 35%.
Donate towards a college savings plan
You can claim a deduction of up to $13,000 per recipient if you donate towards a 529 college investment plan for children or grandchildren. This is because income produced from a 529 investment plan is not taxable.
Earned Income Tax Credit Claim
If you are eligible for the Earned Income Tax Credit which is for lower income earners with three or more children, you should claim it. The Earned Income Tax credit can provide up to $5,751 in credit claims. To be eligible, you should be earning no more than $49,078 with three or more children. To claim your credit, you must file your tax returns. About 80% of those eligible for the credit do claim it.
Pay Now to Save Soon
If you prepay your January mortgage or your state taxes, you can claim deductions for 2013. But you have to bear in mind the centralized optional minimum tax, which is a tax initially, intended for the wealthiest taxpayers but has progressively more begun to include above regular wage earners as well. Married couples who both work and make deductions have a high chance of having to pay the Alternative Minimum Tax (AMT). If you have to pay the AMT, then it is useless to prepay next year’s expenses this year.
Make sure you have all your important documents on file. You should have your W-2, 1099 Forms and mortgage interest declarations. Then you should be keeping all your receipts as evidence of claimable expenses. File similar types of documents as one. Having all your documents in order helps to make sure all your records are correct. Otherwise, you may run into holdup in your tax processing when your Social Security number does not count with your tax filing, for example. Likewise, your tax refunds can be late if your children require Social Security etc.
* Get Tax help with American Tax Professionals Network