There are many tax deductions that we all know about such as deducting mortgage interest, traditional IRA contributions, and state income tax. What about the other lesser known tax breaks?
Job relocation moving expenses
Many workers continue to be open to relocating if the right job opportunity presents itself. There was a recent study completed by CareerRelocate & Harris Interactive, which indicated that 44% would move for the right opportunity. If you moved and incurred the expense of it for starting a new job, there’s a deduction for it. The deduction is computed on Form 3903 of your Form 1040. Also, the deduction is from adjusted gross income on Form 1040, which means that you are not subject to limitations on Schedule A. To be eligible, you must satisfy the: 1) Distance test – your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home & 2) The length of employment test – If you are an employee, you must work full-time for at least 39 weeks during the first 12 months immediately following your arrival in the general area of your new job location. If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months immediately following your arrival in the general area of your new work location. There’s one stipulation – the tax code (IRS Publication 521) only allows one, one-way trip from your old home to your new home as a deductible moving expense. Therefore, if you moved, but couldn’t fit everything into your car or U-Haul with one trip, you’re out of luck.
Self-employed commuting expenses
When traveling from your home office to other temporary business locations or client sites, you can deduct the actual travel expenses or claim the standard mileage rate ($0.555 per mile). For instance, if you traveled a total of 10,000 miles to various business locations, you could deduct $5,555 (10,000 * $0.555). The total tax deduction would result in a $1,940 reduction to your overall tax liability, which assumes a 35% tax rate.
Deducting loan origination fees from refinancing
With mortgage rates still at or near historic lows, many taxpayers refinanced last year or may consider it for 2013. You can deduct loan origination fees or points as per IRS publication 936. You can generally deduct those points or loan origination fees as a Schedule A itemized item over the life of the loan or in the year paid, if certain conditions are met. Even more, if you had previously refinanced and had an un-amortized portion when you went to refinance again this year, you can write that entire amount off in the year you do the second refinancing.
You can deduct portfolio management fees
If they are management fees (i.e. asset based), then you can classify those fees in the miscellaneous expense line item of your tax return. However, it is important to note that miscellaneous expenses can only be treated as an itemized deduction if they are in excess of 2% of your adjusted gross income (AGI).
State and local sales tax deduction
This deduction can be significant for those taxpayers that made significant purchases in 2012 (IRC Sec. 164(b)(5)). Keep in mind that you can deduct either state income tax or sales tax. Thus, the sale tax deduction is a great benefit for those living in no income tax states.
Self-employed health insurance costs
They can deduct health insurance costs for themselves and their families when calculating their self employment tax. The catch is that the benefit doesn’t apply to those with a secondary business and a full-time job in which their employer provides for a subsidized health plan. Those with spouses that have an employer subsidized health plan are also disqualified from the deduction.
More tax questions? Browse answers or ask 2012 tax questions online. You can also find accountants online here.
Related Articles
->Avoid These Common Tax Return Mistakes
->When Should I Start Filing My 2012 Tax Returns?
->Why Is My 2012 Tax Refund Less Than It Was For 2011?
->What Does The Fiscal Deal Mean For Your 2012 & 2013 Taxes?
->The Payroll Tax Cut Increases To 6.2% In 2013
->Year End Flexible Spending Account Advice
->Tax Planning Strategies to Mitigate Your Risk for Higher Taxes in 2013
