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Maximize Your Tax Deductions

Are you sure you are taking all the deductions you are entitled to? We recommend you consult with your tax consultant to make sure you are taking advantage of all the deductions available as well as to make sure your deductions are legitimate. Every persons financial situation is different and the below tax tips are in no way meant to be a substitution of the advice of your tax consultant, but the tips can inform you of deductions you might not have been aware of previously

Itemize or Standard Deduction
If your itemized deductions exceeds your standard deduction, itemizing could save you a pretty penny. Add up your expenses for the deductions listed below. If they exceed your standard deduction, itemize.

• State and local taxes

• Gifts to charity (includes cash, fair market value of clothes, furniture, cars etc., travel expenses for volunteer work).

• Mortgage interest

• Property taxes

• Points (When purchasing a home, points are fully deductible in the first year).

• Medical expenses in excess of 7.5% of your AGI (AGI: your total income minus retirement account contributions and investment losses).

• Miscellaneous deductions in excess of 2% of your adjusted gross income (Unreimbursed employee business expenses, trade journals, moving expenses, fees to an accountant etc.).

Tax Friendly Investments
Good tax planning could also save you a pretty penny on your taxes right now as well as help you later on when you retire.

401(K) - These employer sponsored plans allow you to contribute a certain amount of your salary every year into a retirement account. Both the contribution and the earnings are tax deferred, and because many employers match part of your investment, 401(K)s are an even better deal than traditional IRAs. The earlier you start putting money away in a retirement plan, the less money you have to contribute to reach your goal.

IRA - Adults may invest a certain amount per year into an Individual Retirement Account (IRA). Earnings go untaxed until you withdraw them at retirement, hopefully when you are in a lower income bracket. Depending on your income and whether you invest in other retirement plans, your contribution may also be deductible.

MUNI - By investing in a municipal bond (muni), you're making a loan to a state or local government, for which you receive interest. The interest is exempt from federal taxes - and from state and local taxes if you're a resident of the state that issued the bonds.

ANNUITY - Annuities are issued by insurance and mutual fund companies, and like 401(K)s and IRAs, they allow you to defer taxes on your earnings until retirement. Your annuity contribution, however, is neither tax deductible nor tax deferred, and you pay higher transaction fees. Because of this it makes sense to invest in annuities only after you've reached the maximum limits on your 401(K) plan and IRA.

If you have questions about deductions, visit the IRS web site for answers or get one of the many free forms from the IRS by calling: (800) 829-3676

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