More Money-Saving Tax Deductions

12:35 pm Uncategorized

Taxes2 More Money Saving Tax DeductionsAn excellent list of money-saving tax deductions is available at Kiplinger.com, and include many that we detailed in a post last month.

Here are some more detailed deduction strategies from the Kiplinger list:

State Sales Tax. California has an income tax, so that deduction may be a better deal for most residents – because you do have to choose between deducting state and local income taxes or state and local sales taxes.  If you bought a big-ticket item this year that included sales tax – a car, a boat, or even home building materials – you get to add the state sales tax to the amount shown in IRS tables for your state (if it doesn’t exceed the state’s general sales tax rate).

Reinvested Dividends.  If you have dividends from mutual funds automatically invested in extra shares, each reinvestment increases your tax basis in that fund – which reduces the taxable capital gain when you redeem the shares.

Health Insurance Deduction to Reduce Self-Employment Taxes. If you are self-employed, you can deduct the cost of health insurance premiums in calculating the self-employment tax on Schedule SE.

Estate Tax on Income in Respect of a Decedent. If you inherited an IRA from someone whose estate was large enough to be subject to the federal estate tax, you can get an income tax deduction for the amount of estate tax paid on the IRA assets you received.

State Tax Paid in Spring of 2010. If you owed state taxes on the 2009 return you filed last spring, remember to include that amount with your state-tax deduction on your 2010 return.

American Opportunity Credit. This tax credit is available for up to $2,500 of college tuition and related expenses paid during the year for individuals whose modified adjusted gross income is $80,000 or less ($160,000 or less for married couples filing a joint return).

Making Work Pay Credit. This credit has probably been realized via reduced payroll tax withholding, but to lock it in you need to claim the credit — $400 for singles and $800 if you’re married and filing a joint return — on your 2010 return by using a Schedule M.

More Bonus Depreciation. As part of the year-end new tax law, 50% first-year bonus depreciation was extended and expanded retroactively to let filers write off 100% of the cost of qualified assets placed in service between September 9, 2010 and December 31, 2011. In effect, filers get to claim unlimited expensing. This break applies only to new assets with recovery periods of 20 years or less.

Sale of Demutualized Stock. If you sold stock in 2010 that you received in a demutualization – which is when an insurer switches from being a mutual company owned by policyholders to a stock company owned by stockholders — be sure to claim a basis to hold down your tax bill.

For more tax-saving strategies, contact our California asset protection law firm.

Let our Costa Mesa law offices help you get started by contacting us today.

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