If you happen to be a high-income earner, you are probably quite conscious that some regulations are phased out (either decreased or eliminated) as your adjusted revenue, or AGI, increases. While somewhat unfortunate this really is the cost of success. Thankfully there are some tax breaks up for grabs to nearly any person — irrespective of earnings. Below are several that may work for your situation.
In you’re self-employed, you might be in a position to contribute and deduct as much as $49,000 for 2011 or up to $50,000 for 2012 by producing a simplified employee pension, or SEP. Adding to a SEP could significantly lower your taxable revenue and help you save for retirement. If you feel like you may have missed out on several tax opportunities there may still be some hope. Unless you currently have a retirement strategy set up, you are still able to set up a SEP and make a deductible contribution for 2011. Understand of course that it may be carried out as late as Oct. 15 of the year should you extend your 2011 return for that automatic six-month period.
Deducting Alimony Payments to your Ex:
Assuming you qualify, you’re in a position to claim a complete write-off of one’s alimony payments on-line 31a of Form 1040.
Credit for Overpaid Social Security Taxes:
Did you have two jobs last year and earn more than $106,800? Then you probably had too much withheld for Social Security tax. Your credit will be for the amount you contributed beyond $4,486, which represents the 4.2% Social Security tax based on a maximum salary of $106,800. Getting this money returned to you is as simple as reporting the overpayment to the IRS.
Writing Off Your Gambling Losses:
If lady luck is no longer on your side and losses have resulted there may be an opportunity to recoup some of your hard earned money. The government feels your pain, and will allow you to deduct your losses that are comparable with what you’ve won in the past year on Plan a, line 28, for those who you use itemize deductions. (Your gross winnings are taxed as typical revenue and should be reported on the web 21 of Form 1040.) Be aware that in the occasion you claim this deduction, you will need to have written evidence of your losses, in the event you get audited. Make sure you can provide some evidence of these losses through checking account statements or receipts from your local casino. Down the road, keeping a journal for your everyday net wins and losses will probably do the trick.
The Dependent Care Credit:
For those of you who worked last year and also paid someone to babysit your children under the age of 13 you may be eligible for this credit. Keep in mind though, if you are married, both spouses will need to be working unless the first is a student. Furthermore, neither of you may have contributed to a child-care flexible spending account (via your employer) to cover precisely the same expenses this past year.
Writing Off Neglect the Interest:
Did you borrow on margin last year? If you itemize deductions on your own return, you almost undoubtedly can deduct a percentage of what you paid on the account on line 14 of Schedule A (assuming you itemize deductions). The deduction for the interest paid to carry taxable investments (so-called investment interest expense) is unaffected by any phase-out guidelines. There is only one tiny catch: Ignore the interest expense deduction generally cannot exceed your taxable revenue from interest, annuities, royalties and short-term capital gains. Having mentioned that, any excess investment interest expense may be utilized with in the tax year. See IRS Form 4952 (Investment Interest Expense Deduction) for the particulars (like a specific election to look after long-term capital gains and dividends as investment earnings).
As it stands, some of the best ways to find a tax break is by having a simple conversation about with a tax professional. Especially with the constantly changing tax laws that can make it hard to keep track. To get the latest information on potential tax benefits, contact us or fill out a request form at our tax quote site and we will get back to you with a free quote on how to apply tax breaks to your taxes.