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Noncash
contributions
Now,
let’s say you emptied your closets and gave everything to Goodwill or a
similar charity. The value of your donated items -- clothes, furniture,
whatever -- is deductible. Get a written receipt. If you've already dumped
your old clothes in a Salvation Army box and walked away without a receipt,
take the deduction anyway. You’ve legitimately made the contribution. The
IRS uses the Salvation Army Valuation guide to determine the value of
noncash donations. You can print the guide from the internet at www.salvationarmy-usaeast.org/help/valuation_guide.htm
New
points on refinancing
With
interest rates so low over the past year, lots of homes have been
refinanced, sometimes more than once. Any points you pay to refinance your
home can be deducted on a monthly basis over the life of the new loan.
Old
points on refinancing
This
is one deduction lots of people miss. All unamortized points on an old
refinancing are deducted in the year of a new refinancing.
Health
insurance premiums
Any
health insurance premiums you pay, including some long-term care premiums
based on your age, are potentially deductible. You have to add these,
however, to your other medical expenses. Medical expenses have to exceed
7.5% of your adjusted gross income (AGI) before they give you any tax
benefit.
But
if you’re self-employed and not covered by any other employer-paid plan,
you can deduct 100% your health insurance premiums above the line.
Educator
expenses
If
you’re a qualified educator, you can get an above the line deduction of as
much as $250 for materials you bought in 2003. That includes books, supplies
and even computer equipment. You qualify if you’re a kindergarten through
grade 12 teacher, aide, instructor, or principal. Unfortunately, this
special provision expired on Dec. 31, 2003.
Student
higher education expenses
For
2003, if your adjusted gross income isn’t more than $65,000 ($130,000 on a
joint return), you can get an above the line deduction of as much as $3,000
for any higher education expenses you paid.
See
if you qualify for the Hope or Lifetime Learning Credit.
The
Hope credit is worth $1,500 per student subject to income limits. The
Lifetime Learning Credit is worth $2,000 per return. Compare, and go with
the one which gives you the biggest benefit.
Clean
fuel deduction
You
can get another above the line deduction of up to $2,000 of the cost of
buying a clean fuel vehicle. That’s a car that uses a significant source
of energy other than gasoline.
Hybrid
cars qualify. A hybrid car combines an electric motor with a gas fueled
internal combustion engine. Cars that the IRS has blessed include the Toyota
Prius, the Honda Insight and the Honda Civic Hybrid.
You
get the deduction in the year you start using the car, and you must be the
original owner. Take it on your Form 1040 by writing in “clean
fuel.”
Investment
and tax expenses
Many
of us forget tax planning and investment expenses because they are part of
miscellaneous itemized expenses. Their total must exceed 2% of your adjusted
gross income before you get any tax benefit.
Expenses
to track include your employee business expenses, tax preparation fees and
even the portion of your legal or accounting fees relating to tax
planning.
Many
people shortchange themselves on the deduction of investment expenses. They
remember the safety deposit box fees. But how about the annual fee paid your
broker and any IRA fees you pay directly? You may remember the cost of your
investment publications on subscription -- such as Forbes, Fortune, Business
Week, Worth and Barron's.
Casualty
deductions
Last
year, it was either too wet (think Hurricane Isabel in the East) or too dry
(remember the wildfires in California).
If
President Bush declared your area a disaster area, you can claim your loss
either for 2003 or for 2002.
If
you do qualify, it may pay to file a revised 2002 tax return. For that you
will need Form 1040X. The tax rates were higher then. That means that any
deduction would be worth more.
Retirement
tax credit
This
one is even better than a deduction. It’s a credit -- a dollar for dollar
reduction in your tax -- not just in your taxable income. And, it also can
come with a deduction. This deduction is designed to give moderate and
low-income taxpayers an incentive to save for retirement.
Make
a contribution into your retirement account. That money isn’t taxed
currently. So, it’s like you got a deduction off your income. In addition,
you get a credit of as much as 50% of the first $2,000 invested. That’s as
much as a $1,000 reduction in your tax. The tax credit disappears as your
adjusted gross income increases. But singles with AGI’s up to $25,000 and
joint filers with AGIs up to $50,000 will qualify. Contributions to your
401(k), 403(b), SEP, traditional or Roth IRAs will qualify as well.
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