Spring Training is underway, bringing baseball players back for another season. It is a time of unbridled confidence when every team imagines it will win the World Series, and every player will have a record-breaking year. As a Ranger fan, I’m particularly excited about the prospects for this year! Of course, few of these predictions come true and only one team wins.
It is also TAX TIME as the clock ticks closer to the April filing deadline. Just like a major-league ballplayer returns to Spring Training to get the basics down, it is important not to overlook deductions and credits to save money on your tax bill.
Surprise, Arizona is good for baseball. Surprises on your taxes are not.
Here are few IRS credits and deductions that are often overlooked or just plain forgotten.
- State sales tax: Did you know you can choose to deduct state sales tax? That’s important if you live in Texas since Texas doesn’t have a state income tax. It’s also important if you make a large purchase, such as a car, boat or recreational vehicle.
- Foreign tax credits: Don’t skip this one, especially if you own mutual funds. Your 1099 forms might reveal that you are paying more foreign taxes than you imagined—particularly if you imagined that you were paying none.
- Child care credit: Even if you pay for child care with pre-tax dollars, you may be able to claim a credit for some childcare costs exceeding the $5,000 maximum for your pre-tax plan. Maximum age for the credit is 16.
- MBA Tuition Tax Deduction: The IRS says you can write off qualifying work-related education expenses if you are established in a trade or profession prior to starting your education. Your education maintains or improves the skills you had prior to the education. You continue to use these improved skills after your education. Every situation is different, and there are some nuances and exceptions to the rule, but any MBA student should at least look at their own financial situation to determine the most financially rewarding outcome.
- Job-hunting costs: If you are looking for a job in your same line of work, track your expenses. If you itemize, you can deduct all sorts of expenses, such as printing costs for resumes, postage, food, lodging for out-of-town searches, and many more associated costs. They will need to be over 2% of your AGI to be able to deduct them.
- Moving expenses for a new job or job location: Did you move more than 50 miles away to take a new job? You can cut your tax bill by deducting reasonable moving expenses and, you don’t need to itemize to benefit from these deductions.
There’s lots more to know about each of these tax deductions and credits, as well as how taxes impact all aspects of your life, from retirement to education savings.
As you can see, there are many options when preparing your taxes including deciding whether to hire a CPA to prepare your taxes. Depending on how complex your finances are, you may want to put some thought into whether one is right for you.
Do you file your own taxes or do you hire a CPA? Why or why not?
Michael Tannery CPA CDFA® AIF® ● CEO
Be A Financial Olympian™