GOLDEN VALLEY, Minn. - The countdown is on! With the April 17th deadline just weeks away, many are scrambling to file their tax returns. But before you rush to send in your return, make sure you take advantage of all the deductions available to you.
Justin Halverson, co-founder of Great Waters Financial, stopped by the KARE 11 News at 4 to talk about the top 7 deductions people miss so you can keep more money in your pockets and less in Uncle Sam’s.
Qualified charitable distributions by those age 70.5 or older from IRAs: If you gifted all or part of a required distribution to a qualified charity in 2017, you may be able reduce this amount from your taxable income for the year. The value with this deduction is for those that don’t itemize, it’s a way to reduce your taxable income without having to worry about exceeding the standard deduction.
Donor-Advised Funds: A donor-advised fund, or DAF, is a private funds administered by a third party and created for the purpose of managing charitable donations on behalf of an organization, family, or individual. Contributions to these popular accounts may be especially desirable under the new tax laws since this deduction will be eliminated for 2018 returns. DAF’s enable donors to bunch smaller gifts into one large amount and take a deduction in the year of the gift – which means you can plan ahead and make future contributions now to help reduce your taxable income. The donor can then designate charities as recipients later. Meanwhile, the assets can be invested and grow tax-free, although the accounts have fees.
Deduction of Financial Planning Fees: Fees paid for financial planning, tax or investment advice, including investment fees, custodial fees, trust administration fees and other expenses paid for managing your investments that produce a taxable income may be deductible on your Schedule A. Periodicals, investment newsletters and online services can qualify as a miscellaneous itemized deduction as well. This is only for non-qualified accounts.
Medical Expenses: Healthcare costs can be a huge burden for Americans of all ages, but they tend to hit seniors and families with young children particularly hard. The good news is that if your medical costs for the year are high enough, you can deduct expenses that exceed 10% of your adjusted gross income (AGI). Imagine you earn $60,000 but have a health condition that requires you to spend $10,000 out of pocket during the year. You'd be eligible to deduct any amount that exceeds $6,000, which, in this case, is $4,000.
Job Search Expenses: Looking for work can be a costly prospect, but if you meet certain criteria and thoroughly document your expenses, you might get a sizable tax deduction out of the deal. Any time you travel to a job interview, you can deduct the costs of getting to and from your destination, including air or rail fare, parking fees, and lodging. You can also deduct the cost of using a career counselor or resume service.
Real estate expenses like interest, mortgage insurance, and property taxes: Though there are numerous tax breaks available to homeowners, the mortgage interest deduction can be particularly lucrative, especially during the early years of your mortgage. That's because during this time, the majority of your monthly payments are applied to the interest portion of your loan, as opposed to its principal.
Bunch deductions. Does this scenario sound familiar to you?: You always seem to have a lot of expenses that you think could help cut your tax bill if you itemize. But every year, they go to waste. The problem is your costs regularly fall just short of the income thresholds they must meet in some deduction categories. Get around this tax-reduction roadblock by bunching your expenses. Depending on your personal situation, a professional can help you create a strategy to do this effectively. However, it’s important to note that bunching deductions usually helps you out only every other year. Generally, if you bunch your expenses into one year, you will find you don’t have enough to be of use the following year. In those “off” tax years, your itemized expenses will just be smaller or, for some taxpayers, it might be more worthwhile to claim the standard deduction those years. But getting the breaks only on alternate tax filings is still much better than missing out on them every year.