With tax time fast approaching, many Americans are scrambling to get their documentation together and get everything ready for this year’s taxes. Surprisingly, the IRS website has a lot of resources that will help you to not only understand what your taxes deductions and credits are, but tell you about some that you might not even know about.
If you’re loath to go to their website however, below are 10 ways that you can legally lower your tax bill for 2013. Enjoy.
- For people who are self-employed or have a side business, one new law that came about in 2013 will allow you to take a direct 50% “bonus depreciation” for any new equipment purchased in 2013, rather than having to write it off over several years.
- Any contributions that you made to your health savings account that were unused in 2013 can now be rolled over indefinitely and also grow tax-free, akin to assets in your retirement account.
- One of the best ways to lower your taxes is to contribute as much as possible to your retirement account. Not including a Roth IRA, you can deduct all of the taxable income paid into your retirement account and reduce your total taxable income as well. These funds also grow tax-free until retirement and are one of the best ways to grow a decent sized “nest egg” for your golden years.
- A $2000 maximum for the Lifetime Learning Credit for adult education is also available, as well as a 20% deduction of up to $10,000 spent on any post-high school education. This deduction is for anyone who improves their job skills with additional education.
- If you can combine a business trip with a vacation, you can deduct your unreimbursed expenses spent on the business part of your trip, including airfare, part of your hotel bill and also a proportionate amount of time that you spend on your business activities.
- Do you work at home or have a side business? If so, the home office deduction will allow you to deduct a percentage of your home that is used for your business (Schedule C, 1040). For example, if you use your guest bedroom exclusively for an office and it constitutes one fifth of your living space, you can deduct one fifth of your rent or mortgage as well as your utility fees on your taxes.
- If you sold a financial asset in 2013, be sure to add in all of the reinvested dividends as this will increase the cost basis and reduce your capital gains.
- If you travel over 100 miles from home to work, and you need to stay away overnight, any hotel or motel bills that you have can be deducted as well as 50% of the cost of any meals. Deducting your mileage costs is possible as well.
- Any charitable deductions that you made in 2013 with payroll deduction (for example, a donation to the United Way) as well as any checks, cash and clothing or goods donations are all deductible. These can actually add up to quite a bit so don’t forget them.
- Lastly, for people who are either full-time or part-time self-employed individuals, there are a huge list of tax deductions that you can take. These include business-related vehicle mileage, advertising, website fees, shipping and handling of products, a percentage of your home Internet charges that are used for the business, memberships, business-related travel, professional publications, any office supplies that you purchase and any other expenses that you incur when running your business.
While it’s obviously a good idea to rely on a professional tax preparation service provider to help you prepare your taxes, don’t rely on them 100% to get every deduction that you’re eligible for. If you do a little bit of due diligence on your own you may well find a few deductions that they overlooked and save yourself even more money this year on your taxes.