How To Take Advantage of Mortgage Tax Deductions

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Mortgage Tax Deductions

Often when considering purchasing a home, one of the things that intrigues potential homeowner’s is the right to be able to claim mortgage tax deductions. There are a number of deductions that are available including interest payments, points and some closing costs. What is not always evident however, is what must be done in order to claim these deductions and when they might be most beneficial.

Prepare for additional paperwork

One of the first things that a taxpayer will need to do to take advantage of mortgage tax deductions is to prepare to itemize deductions. The most significant opportunities for deductions come in the early phases of a mortgage, especially during the first five years. This is because this is when the most interest is paid and also when a new home buyer can deduct points and closing costs. This will require filing a Form 1040 as well as a Schedule A for federal tax filings.

Understanding who can deduct interest payments

Interest payments can only be deducted by the person who is legally obligated to pay the mortgage. When a property is owned equally by two or more non-spousal taxpayers, each of them may claim one half of the interest payments on the mortgage. It is also critical to note that the mortgage company should have issued a Form 1098 with the full amount of interest paid and if this is the case, then copies should be attached to the tax returns.

Second homes and mortgage deductions

For a second home to qualify for tax deductions, the owner, or the person responsible for the mortgage, must have spent a specific number of days in the home throughout the year. In other cases, the Internal Revenue Service would qualify the property as a rental property and is subject to different tax laws. Homeowner’s who have second homes should review Publication 527 if they are confused about the rules.

There are numerous opportunities for a homeowner to take a tax deduction for their home mortgage payments and for specific events that may occur such as destruction of the home, repairs and remodeling and refinancing of the home. However, a homeowner must ensure that they carefully review all of the rules that apply to their individual circumstances. For example, while a primary home loan to purchase may be eligible to claim points, personal mortgage insurance and other costs as a tax deduction, a cash-out refinance may not be eligible for these tax deductions. Homeowner’s should carefully review Internal Revenue Service Publication 936 for information and if in doubt, always contact a qualified tax accountant who can help take the mystery out of mortgage tax deductions.

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Don’t Forget these Deductions for your Tax Return

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Hopefully you aren’t procrastinating so much that it makes a difference, but its important to note that the due date for filing your 2011 United States federal income tax return isn’t the traditional April 15th, rather its April 18, 2012. This is due to the celebration of Emancipation Day (the day that President Lincoln signed the Declaration of Emancipation) a day earlier than normal (since April 16th is a Saturday this year). As you gather together all of your financial information for fiscal year 2011, minimize your tax liability by keeping the following deductions in mind:

Child Care Deduction
One of the most often overlooked tax deduction line items is the child care deduction. This deduction does not require the taxpayer itemizing deductions and can be taken by any taxpayer who works and has minor children or by any couple where both partners work and have minor children. It can also be taken if one member of a couple is handicapped or disabled and cannot care for the children while the other partner works.

The main items to have available to take the child care deduction are:

  1. Provider’s Social Security number [if an individual]
  2. Provider’s Tax identification number [if an organization]
  3. Provider’s legal name, address and phone number
  4. Total amount paid to Provider
  5. If more than one child, a breakdown of the total dollar amount paid per child

Many taxpayers overlook this particular deduction and it can make a big difference in their return, either by diminishing their payment due or often by increasing a taxpayer’s refund exponentially. In some states it can even result in a state tax refund even when nothing was paid in all year.

Business Expenses and Schedule C
Another often overlooked deduction is business expense. Many taxpayers do not realize that they need to file a Schedule C even for a tiny seemingly innocuous home business. One example is Avon ladies or other cosmetics representatives. They have a number of deductions such as product samples, telephone, home office, wardrobe, computer and office supplies and gas and repairs or standard business mileage deduction if they use their car to deliver product. Most women in this small business arena feel that their business is too small for deductions, but they can greatly assist in the family’s overall tax situation and determine whether they pay in April or get a much-needed refund.

Sales Tax & License Fees
If you itemize, one of the most overlooked deductions is your annual automobile license fee. The part of the fee that is based upon the value of the vehicle can be deducted.  Also, if you purchased any big ticket items during the tax year, the sales tax paid on those items could diminish your 2011 taxes as well.

Gambling
Gambling costs are by far the most overlooked item on tax returns. You can bet that it’s a sure thing that casinos will report any winnings to the IRS, but reporting what you spent acquiring that winning jackpot is your sole responsibility.  That’s why, if you’re even a little bit of a gambler, it is always best to save all of your ATM, check cashing or cash bank withdrawal receipts as proof that you had the wherewithal to make those bets that resulted in your winnings. In most cases, the amount of cash outlay over a one year period will be equal to what was won. In any case, you can write off an amount only up to the amount that you won. It would then be a wash, however, and at least you would not have to pay taxes on your winnings.

Charitable Contributions
Many taxpayers remember to deduct their cash contributions to their church and assorted charities, but forget about tangible goods that they may have deducted. Making sure to get a receipt from any charitable organization that you donate clothing, toys, furniture, appliances and other household goods to is always a good idea. In addition, if you have an old car that really isn’t worth very much if you sell it, it could be worth much more as a tax deduction, so be sure to donate it before the end of the tax year.

While it is your responsibility as a citizen of the United States to pay your fair share, it isn’t your duty to pay more than your fair share. Work within the boundaries of the tax code, and remember that the deductions are there for a purpose. If they apply to your circumstance, take full advantage of them!

Crafted by Stacy Nguyen for the firm of Bottar Leone, PLLC. who believe in American principals, like the responsibility of paying taxes and the right to a fair trial. A good Syracuse personal injury lawyer is ready to help you win your case.

Essential Tax Tips for Freelance Writers

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The career of a freelance writer can be very rewarding. However, the career can quickly lose its appeal when tax time arrives and you owe several thousand dollars. Thankfully, there are things you can do to reduce your tax bill and prevent owing such a large sum at once. The following are just five essential tax tips for freelance writers.

Pay Your Estimated Taxes

This cannot be stressed enough. Freelance writers need to pay estimated taxes in April, June, September and January of the following year. These payments will ensure that you don’t get penalized for paying your taxes late and will help ensure you don’t have a large tax bill come April. There are a number of easy to use resources online that will help you determine the amount of your estimated taxes.

Setup a Home Office

If you’re working from home, you should be able to deduct part of your rent/mortgage and utilities. However, when setting up a home office, it needs to be an area that you use solely for the purpose of your business. This does not have to be an entire room. It may even be a small corner of your home. The biggest thing to remember is to save this area for work.

Understand Your Deduction Rights

As a freelance writer, you can deduct many different things. It may be books you purchased to help teach you how to write a novel or even office supplies. Take the time to find out what you can deduct and how much of a deduction you can take. For example, you may be able to deduct part of your internet costs as long as you have proof of the percentage of time that the internet was used for work purposes.

Keep Each and Every Receipt

It doesn’t do you any good to purchase books, pens and other office items if you don’t keep the receipts. Without these receipts, if you get audited, you will be in big trouble. You need to be able to account for each and every item you count as a business expense. You should also start a filing system that keeps the receipts in order based on the type of expense.

Take Advantage of Deductions

Being self-employed means that you can deduct items that most people might not be able to deduct. For example, you can deduct the cost of health insurance. You can also setup an IRA and deduct up to $5,000 a year. Do your homework and see which items can get you the biggest deductions.

It can be hard to pay your taxes when you’re self-employed, but the good news is you may not have to pay as much as you originally thought. Follow these tips and you’ll have an easier time staying on top of the taxes and getting the biggest return.

About the Author: Wendi Ginter is an accountant who offers tax support to a wide variety of freelancers and small business owners. Make sure you talk to your accountant about any and all deductions you wish to make to ensure you’re listing them legally and properly.

Get the Biggest Refund Guaranteed With TaxACT

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TaxACT utilizes an examiner series that covers Credits, Deductions, and Income for maximum return on your refund. Stock Assistant is specially designed to quickly assess the state of your stock income. Audit Assistant will steer you safely through the nightmare scenario of being audited. There are also loan and … Read more at 2009 Taxes

TaxACT is a great service that simplifies your tax refund service and does so for free. But perhaps the biggest benefit is the guaranteed increase in the size of the refund itself. TaxACT offers a pledge backed up by many different programs and functions in its up to date system.

Tax Act

TaxACT utilizes an examiner series that covers Credits, Deductions, and Income for maximum return on your refund. Stock Assistant is specially designed to quickly assess the state of your stock income. Audit Assistant will steer you safely through the nightmare scenario of being audited. There are also loan and savings calculators to help determine payments including interest rates and amounts within a given time period. There are even TaxACT alerts which will pop up to let you know of any savings opportunities you may have passed over.

In addition to the many different programs running to ensure that every possible advantage is not missed when you file your income tax returns, TaxACT offers unlimited support for any and all questions in order to ensure that the process of filing your taxes is done in as accurate a manner as possible.

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The thorough and meticulous programs and systems put in place by TaxACT begin to be especially useful when considering the more complicated tax returns. If you are filing under circumstances of marriage, divorce, the purchase or sale of a house, or many other circumstances. TaxACT covers 1040, 1040A, and 1040ez as well as Schedules A,B,C,D,E, and F. When dealing with tax returns that have many different factors it is much more possible to miss potential tax breaks which could dramatically increase your refund.

If your priority this tax season is to get the most money you possibly can, TaxACT is your best choice. Not only is the service free and much simpler than filing your own taxes, but more importantly you will get a bigger refund.

Free Tax Return Filing

Free Tax Return Filing

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Free Tax Return Filing

If you are in search of an online service that still provides a way for you to file your 2008 taxes before the end of the year, Free Tax USA is the solution you have been looking for. Although e-filing of tax returns for 2008 ended on October 15, 2009, you can still prepare your tax return online for free and mail in your completed forms. Something you may not have know until now. FreeTaxUSA is one of the few online providers that helps individuals complete their taxes online for past years that they have failed to file for.

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