Income tax deductions & credits

[Anonymous]

I'm starting this thread so people can alert each other to possible tax deductions & credits we all might be missing. It seems I discover a new one every year. Mine are below. Please post if you have others.

1. Childcare tax credit. I've been deducting nanny and babysitter costs. But I just realized this year that I also can include Aftercare costs from my kids' schools, and also the cost of preschool for my youngest!

2. Bad debt deduction. It's not too often, but every few years I seem to have some unresolved dispute with a contractor or other service provider. Some of these can be treated as bad debts which generate a deduction.

3. Charity deductions. Make sure to catch them all. I always discover extra ones when I review my checkbook each year. I should create a system to track these things. Anyone have a good system I can copy? Also, I really should figure out how to document my non-cash donations over $500, because I'm donating way more than I claim every year.

4. State sales tax deduction. I just discovered this one. You can deduct state sales tax you paid as an itemized deduction. You need to have receipts, which is a huge hassle. But IRS has an online calculator that lets you get a rough (likely low) estimate. I was surprised at how big the number is. Anyone got any tips for keeping better track next year? I suspect I don't really need actual paper slip receipts, but just good documentation. So maybe there's an app that lets me enter sales tax as I pay it, or maybe there's some function Amex provides online to calculate it for me off my credit card payments. Any ideas?

Any other tax tips from smart savers out there?

[Anonymous]

OP again. On #4, I just read the rules more closely. It appears I can deduct either my state income tax or my state sales tax, but not both. Oh well.

[Anonymous]

Anonymous wrote:I'm starting this thread so people can alert each other to possible tax deductions & credits we all might be missing. It seems I discover a new one every year. Mine are below. Please post if you have others.

1. Childcare tax credit. I've been deducting nanny and babysitter costs. But I just realized this year that I also can include Aftercare costs from my kids' schools, and also the cost of preschool for my youngest!

2. Bad debt deduction. It's not too often, but every few years I seem to have some unresolved dispute with a contractor or other service provider. Some of these can be treated as bad debts which generate a deduction.

3. Charity deductions. Make sure to catch them all. I always discover extra ones when I review my checkbook each year. I should create a system to track these things. Anyone have a good system I can copy? Also, I really should figure out how to document my non-cash donations over $500, because I'm donating way more than I claim every year.4. State sales tax deduction. I just discovered this one. You can deduct state sales tax you paid as an itemized deduction. You need to have receipts, which is a huge hassle. But IRS has an online calculator that lets you get a rough (likely low) estimate. I was surprised at how big the number is. Anyone got any tips for keeping better track next year? I suspect I don't really need actual paper slip receipts, but just good documentation. So maybe there's an app that lets me enter sales tax as I pay it, or maybe there's some function Amex provides online to calculate it for me off my credit card payments. Any ideas?

Any other tax tips from smart savers out there?

Don't you get letter receipts from the organizations? I just toss all of those in a folder as they come in over the course of the year and then add W-2s, 1099s, etc... as they come in. I keep the folder next to the table where we sort our mail, so nothing goes astray. If I get an electronic receipt, I print it and put it in the folder. No fancy "system," but it works.

[Anonymous]

Going with above re organizing: for charitable receipts and anything else that I might need for taxes, like business expenses or tax preparation expenses, I start a new folder in email every year labeled "Tax Year." I drop everything in there during the year. If you write a check to an organization, drop yourself an email. When you get a thanks email, drop it in the folder.

[Anonymous]

Good thought on email folder. Thanks!

[Anonymous]

A little confused by your first one-isn't there a cap on child care related deductions? With a nanny wouldn't you hit it way before adding in after care costs?

My own contribution-they extended the credits for energy efficient upgrades. So if you added insulation, upgraded HVAC, you can get some money back. With it being so cold thus winter I'm thinking people might have fone this more than usual. I think VA also refunded sales tax paid on energy star qualified appliances to us this year through our tax return.

[Anonymous]

Anonymous wrote:OP again. On #4, I just read the rules more closely. It appears I can deduct either my state income tax or my state sales tax, but not both. Oh well.

Yeah, you really shouldn't be giving advice on this stuff. You got a lot of things wrong. For example, you cannot deduct child care/nanny expenses. There are credits for those expenses, but credits are not deductions. There are also income limitations and other factors so not everyone is qualified to claim them, particularly in this area.

[Anonymous]

Anonymous wrote:I'm starting this thread so people can alert each other to possible tax deductions & credits we all might be missing. It seems I discover a new one every year. Mine are below. Please post if you have others.

1. Childcare tax credit. I've been deducting nanny and babysitter costs. But I just realized this year that I also can include Aftercare costs from my kids' schools, and also the cost of preschool for my youngest! It is more complicated than that. for one thing, you cannot deduct these expenses -- there are only credits and exclusions. there are income limitations. you can claim the dependent care credit or use a dependent care FSA, but not both. You must have the tax ID for the provider. And there are limits.

2. Bad debt deduction. It's not too often, but every few years I seem to have some unresolved dispute with a contractor or other service provider. Some of these can be treated as bad debts which generate a deduction. You're confusing me. You have delinquent contractors who owe you money? That doesn't seem like a very common situation to me.

3. Charity deductions. Make sure to catch them all. I always discover extra ones when I review my checkbook each year. I should create a system to track these things. Anyone have a good system I can copy? Also, I really should figure out how to document my non-cash donations over $500, because I'm donating way more than I claim every year. you need a receipt provided by the charity for anything over $250. just keep track of your receipts. Also, you can only deduct charitable donations if you itemize

4. State sales tax deduction. I just discovered this one. You can deduct state sales tax you paid as an itemized deduction. You need to have receipts, which is a huge hassle. But IRS has an online calculator that lets you get a rough (likely low) estimate. I was surprised at how big the number is. Anyone got any tips for keeping better track next year? I suspect I don't really need actual paper slip receipts, but just good documentation. So maybe there's an app that lets me enter sales tax as I pay it, or maybe there's some function Amex provides online to calculate it for me off my credit card payments. Any ideas? As you already noted, you can only claim this in lieu of the income tax deduction. Unless you live in a state without an income tax (Texas, Florida, Wyoming, Washington, etc.) this really doesn't help people in our area.)

Any other tax tips from smart savers out there?

I know you mean well, but please refrain from giving tax advice here.

[Anonymous]

Anonymous wrote:I know you mean well, but please refrain from giving tax advice here.

Lighten up. I'm pretty sure it's obvious I'm no accountant or tax lawyer, so anyone should check carefully about whether she qualifies before making any tax moves. I'm just offering up items that have helped save my family money on taxes. Maybe they're applicable to your situation, and maybe they're not. This is meant as a brainstorming thread, not your 1st year tax class from law school. If anyone wants to check the details on any of these, IRS has useful publications on each of them to spell out the details.

It seems like you may know a little something, so instead of crapping on my brainstorming ideas, why don't you offer some suggestions of your own?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I know you mean well, but please refrain from giving tax advice here.

Lighten up. I'm pretty sure it's obvious I'm no accountant or tax lawyer, so anyone should check carefully about whether she qualifies before making any tax moves. I'm just offering up items that have helped save my family money on taxes. Maybe they're applicable to your situation, and maybe they're not. This is meant as a brainstorming thread, not your 1st year tax class from law school. If anyone wants to check the details on any of these, IRS has useful publications on each of them to spell out the details.

It seems like you may know a little something, so instead of crapping on my brainstorming ideas, why don't you offer some suggestions of your own?

Nah, you shouldn't be trying to give advice since you seem pretty uninformed. For example, the child care care credit - the majority of DCUM posters are going to have incomes above the limit for this. I "qualify" based on my income and the max credit you can get is $400 even with thousands of dollars in expenses. You also have to itemize. It's not even worth it anymore for me to worry about taking the credit now.

[Anonymous]

Anonymous wrote:Nah, you shouldn't be trying to give advice since you seem pretty uninformed. For example, the child care care credit - the majority of DCUM posters are going to have incomes above the limit for this. I "qualify" based on my income and the max credit you can get is $400 even with thousands of dollars in expenses. You also have to itemize. It's not even worth it anymore for me to worry about taking the credit now.

I always get mad when I see that $5,000 limit... and that's per household not per kid... in what world do people pay only $5,000 a year for child care?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Nah, you shouldn't be trying to give advice since you seem pretty uninformed. For example, the child care care credit - the majority of DCUM posters are going to have incomes above the limit for this. I "qualify" based on my income and the max credit you can get is $400 even with thousands of dollars in expenses. You also have to itemize. It's not even worth it anymore for me to worry about taking the credit now.

I always get mad when I see that $5,000 limit... and that's per household not per kid... in what world do people pay only $5,000 a year for child care?

That's the wrong question. Why should the taxpayers subsidize your child care expenses at all?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I know you mean well, but please refrain from giving tax advice here.

Lighten up. I'm pretty sure it's obvious I'm no accountant or tax lawyer, so anyone should check carefully about whether she qualifies before making any tax moves. I'm just offering up items that have helped save my family money on taxes. Maybe they're applicable to your situation, and maybe they're not. This is meant as a brainstorming thread, not your 1st year tax class from law school. If anyone wants to check the details on any of these, IRS has useful publications on each of them to spell out the details.

It seems like you may know a little something, so instead of crapping on my brainstorming ideas, why don't you offer some suggestions of your own?

Really? You've had contractors and service providers owe you so much money that you were able to deduct bad debts? Do you actually file a Schedule C there? Because that's not something you claim on 1040.

Seriously, you're scarily misinformed and are giving factually incorrect information. Just stop.

[Anonymous]

Anonymous wrote:Really? You've had contractors and service providers owe you so much money that you were able to deduct bad debts? Do you actually file a Schedule C there? Because that's not something you claim on 1040.

Seriously, you're scarily misinformed and are giving factually incorrect information. Just stop.

Yes, I've really had bad debts -- both business and nonbusiness -- that I've claimed. My accountant agreed they were properly characterized, and I'll be offsetting those losses against gains.

Since you don't know anything about my situation, it seems you are the one who's scarily misinformed.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Really? You've had contractors and service providers owe you so much money that you were able to deduct bad debts? Do you actually file a Schedule C there? Because that's not something you claim on 1040.

Seriously, you're scarily misinformed and are giving factually incorrect information. Just stop.

Yes, I've really had bad debts -- both business and nonbusiness -- that I've claimed. My accountant agreed they were properly characterized, and I'll be offsetting those losses against gains.

Since you don't know anything about my situation, it seems you are the one who's scarily misinformed.

Since you have an accountant doing your taxes, why did you start this thread? The implication is that you were doing your own taxes and discovered all these things, even though you clearly do not understand them.

What, exactly, is your business? How, exactly, would a contractor owe you money?

BTW, a bad nonbusiness debt has to be worthless and reported as a short-term capital loss on Form 8949. They're not deductible against ordinary income.