It’s Tax Time! Only 27 days left to get your finances in line!

Little known tax deductions:

[The only real way to get tax deductions is if you itemize – meaning you probably need to own a house since the interest paid is tax deductible, Otherwise you would just take the nice standard deduction. Your deductions lower your taxable income…so in effect, multiply your total deductions by like 0.15, and that is what you actually save]

(1) Donating to a thrift store. You can deduct up to $500 to a thrift store (my favorite is Thriftsmart their proceeds go to awesome ministries). Just donate your stuff, get a receipt and deduct away!
(2) Traveling involved while you volunteer. Say you volunteer at a non-profit place every Saturday and it is 15 miles away. You can deduct 18 cents per mile (32 cents if you helped out in Katrina), which would come out to a $280 deduction.
(3) Deduct the Sales tax you paid that year. Since Tenessee has no income tax, you can deduct the sales tax. There is a standard rate, or if you bought a car or something expensive, you should itemize and keep your receipts.
(4) Tithing – give that 10%! You’ll get about 15% of what you give back to you (and you could always use it to give your church a nice Christmas gift).

Little known tax credits:

[Tax credit is dollar per dollar savings. You don’t have to itemize (i.e. have a house) for these. Say you owe $3,000 in taxes and have a $1,000 credit, then all you owe the government is $2,000.]

(1) Buy a ceiling fan, get $50. If you buy and install an energy saving ceiling fan, you can collect $50 per fan. This credit maxes at $500 for Jan 1, 2006 – Dec 31, 2007. So if you took a $475 credit last year, you can only get $25 this year. Also if you purchased ANY energy star appliance, check out here for the specific credit you can receive.
(2) Retirement Savings Credit. This one is pretty cool. If you are single and make less than $25,000 per year or married and jointly make less than $50,000 per year, you can get a 10% credit for any money you’ve put into a 401(k) or retirement account. So say you jointly put $2,000 in your 401(k). Like everyone else, you automatically get a tax deduction of about $200-$300...but now you can claim this credit for an additional $200…then if your company matches (like Vanderbilt - which is the best gig around), you would get like $4,500 for only contributing $2,000. This is an amazing return on investment! [P.S., if you did this every year, you'd have 1.5 million dollars by the time you retire*)
(3) Tuition Credit. If you make a ton of money, you’ll probably want to deduct your tuition expenses, but normally the credit is to your advantage. You get 20% back from all tuition expenses.

*There is some math and assumptions here. If you want details, let me know.
(Posted by Shannon Adams)


Sean said...

Can I hire you to do my taxes this year. Turbo Tax has nothing on you.

Court said...

Seriously. Hey here's is my question... can I deduct my miles to church if I am volunteering? I go to church A LOT!