As always, I want to keep you updated on the number of views I get because it really means a lot to me all the support and viewership you guys are providing me! We are at 1,107 views all-time! My next goal will be to get to 4,000 views by EOY (end of year) 2014!
Next piece of news, this will be my last post for 2013 and again, thank you for making me feel like my time has been worthwhile. If I only had 10-15 people a week read this, it would be hard to want to continue, but knowing that I have almost 100 people per week reading this makes it worthwhile.
As my last post of 2013, I feel it is important to discuss the upcoming taxes because your actions in 2014 no longer affect your 2013 financial situation (except certain contributions).
Now let's get down to brass tax... PUN INTENDED!!!
This upcoming year is going to have many new tax topics to be discussed. Between Obamacare, breaks set to expire and different life events (child, marriage, buying a house), taxes are SO IMPORTANT!
Also, note that there are two different types of tax reductions, credits and deductions. Credits are a $1 for $1 reduction in taxes owed while deductions reduce your taxable income. These are also called above the line (deductions) and below the line (credits). The line they are referring to is your AGI or Adjusted Gross Income, which is essentially your taxable income.
Deductions vs. Credits
1.) I make $100,000 after my standard deduction (which I receive for being alive). I donated $4,000 in charitable goods and paid $400 towards my educated expenses in the form of school supplies, as a teacher. I can take $250 towards school supplies and the full $4,000 to reduce my taxable income. My taxable income is now $95,750. If I pay Federal tax at 25% my tax is now $23,937.50 from $25,000 if I had claimed no deductions, therefore the $4,250 I wrote off was really only worth $1,062.50.
2.) I make $100,000 after my standard deduction. I have two children and receive $1,000 in tax credits for each child under the age of 17 I claim. FIRST, they calculate my tax, at $25,000 then reduce it by tax credits to make it $23,000.
Here are a few set to expire on 12-31-13
1.) Teachers can deduct school supplies, that YOU pay for UP TO $250.
2.) Mortgage Insurance Premiums
3.) Energy Efficient Appliances - This is capped at $500 TOTAL for all years from 2006 to current, but is a CREDIT, which is great.
4.) State and Local Sales Tax (vs. state and local income tax). This applies more to those purchasing BIG TICKET items such as a boat or car. Therefore, this may be the year to buy that item to enjoy the tax deduction.
Here are a few of the most common tax CREDITS (Below the line)
1.) Earned Income Tax Credit
a.) Basic Qualifications - Earned Income, SSN, Investment Income <$3,100, cannot file married filing separately.
2.) American Opportunity Tax Credit
a.) Applicable to 1st Four Years of Post-Secondary Education (tuition, certain fees, course materials).
b.) The tax credit is up to $2,500 (100% of 1st $2,000, 25% of next $2,000)
3.) Child and Dependent Care Credit
a.) Child must be 12 or under
b.) Payment must be made to a non-spouse
c.) Credit is up to 35% of qualifying expenses (depends on AGI)
*** Tax credits are USUALLY for lower and median income families. Chances are if you're making more than $50,000, you will NOT get the full benefit***
(Above the line)
Here are a few common tax DEDUCTIONS
1.) Reinvested Dividends
a.) This is just a tax savings. Each reinvested dividend, automatically increases the tax basis, therefore decreasing the gains you have to claim.
2.) Charitable Deductions
a.) Both cash and non-cash. Remember anything over $250, you'll need a note or letter from the charity noting the amount. In addition, any driving for charity in 2013 nets you a mileage deduction of $0.14 plus parking and tolls.
3.) Student Loan Interest ***PAID BY MOM AND DAD***
a.) I feel this is a common one that may be missed. If parents pay it, you can deduct the amount of interest paid. Your mom and dad CANNOT claim this deduction, even though they're making the payments potentially.
4.) Job Search Costs
a.) If you're one of the 7% unemployed as of November, 2013 but still have to pay taxes this year. You may have spent time looking for a job.
b.) The expenses must exceed 2% of your AGI and include - transportation, cab fares, employment agency and printing resumes or other materials to help market yourself (which could include a LinkedIn Premium Membership as ex.)
5.) Jury Pay Paid To Employer
a.) If you completed jury duty this year, but the pay went to your employer instead of you (usually you receive your current salary if this happens), you may be able to deduct that amount. The reason for it, the IRS counts it as income you earned. Make sure you check on this.
6.) Meals, Entertainment, Mileage (2016/Schedule A)
a.) This would apply to those who incur expenses from their employer but are NOT reimbursed for them.
b.) As a specific example, I drove nearly 10,000 miles to meet with clients, hand them applications, pick up signed applications, answer questions and attend closings. At the 2013 rate of $0.565/mile, that reduces my taxable income by $5,650.
c.) Another example, is meeting with real estate agents to discuss marketing or other potential items. I spent roughly $2,000 on dinners.
d.) Be careful!!! You can only deduct expense MORE THAN 2% of your AGI. If I had an AGI this year of $100,000, that means I can only deduct expenses more than $2,000. Therefore, the net above taxable income reduction is $5,650.
The good news is, you have tracked all your expenses, because you've used MINT or another service, right? If not, you may be missing out on THOUSANDS of DOLLARS of savings potentially out there. Also, keep in mind, not all tax breaks benefit everyone. There are two main considerations, income and a sense of reasonableness. If you're a staff accountant for a small company, chances are you won't be meeting with "clients" and therefore deducting dinners and mileage for unreimbursed employee expenses. Also, if you only make $30,000 this year, making a charitable donation of $10,000 may look fishy. GETTING AUDITED CAN BE EXPENSIVE AND TIME CONSUMING, work the system as it's set up to be worked, but you never want to set off a ->
We are getting into the final weeks of the NFL season.
Last week I was 14-7 going in and 17-10 coming out. Thanks to a comeback by Tannehill and Lackluster Stafford.
This weeks picks start to get a little more difficult with teams clinching and then sitting players, but let's make an attempt:
Oakland (+10) v. San Diego (Over 50.5)
Arizona (+10.5) v. Seattle (Under 44)
Denver (-10) v. Houston (Over 52.5)
HAPPY HOLIDAYS TO ALL AND SEE YOU IN 2014!
