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Mad dash to April 15: cut your tax bill
Tax laws helped to clarify some issues last year, but how does that affect you now? Here are some tips for tax returns and deductions you can take for 2012.
Traditional IRA contributions
You have until April 15 to contribute up to $5000 to a traditional IRA and make the deduction on your 2012 tax return. If you are 50 or older, you can contribute and deduct up to $6000. If your weren’t covered by a retirement plan at your office, you can deduct the full amount. If you do have a retirement plan at your work, you can take the IRA deduction if your modified adjusted gross income was $58,000 or less (that’s $92k for married couples). If your modified adjusted gross income was between $58k and $68k you can take a reduced deduction (between $92K and $112k for marrieds).
Self-employed retirement plans and health plans
If you work for yourself, you can open a Simplified Employee Pension IRA by April 15 and deduct your contribution for you 2012 tax return. If you are self-employed you can also deduct your health insurance.
Mortgage interest
You can deduct interest on your primary mortgage as well as home equity loan, home improvement loan and lines of credit.
State and local taxes
The federal government allows you to deduct property and income taxes paid to state and local governments.
Sales tax
If you don’t pay much state income tax (or any) you may be able to choose to deduct sales tax instead. You typically don’t need receipts either. The IRS has an online calculator.
Charitable gifts
You must have the documentation for charitable donations. Cash contributions need a cancelled check. Anything over $250 needs an acknowledgement letter from the charity. Anything donation over $5000 needs an appraisal.
Education
Up to $2500 in loans for higher education expenses may be deductible if you make less than $75k ($150k if married). There are also two tax credits for college costs: the American Oportunity Credit and the Lifetime Learning Credit. Look into those.
Medical and dental
Combined, these costs must exceed 7.5% of your adjusted gross income. This works if you have had a major medical episode during the year. Also, this numbers are expected to increase over the next few years.
Source: USAA
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