Tax season is upon us, and people everywhere are sharpening their pencils and doing everything in their power to maximize their refunds. While most of us understand the basics of tax deductions, the complex IRS rules are constantly changing, making it easy to leave a few tax dollars on the table. While preparing your return this year, spend a little extra time to determine if you qualify for any of these often overlooked deductions.
If you donated furniture, clothing, appliances or household items to an approved charity during the previous year, you may receive a write-off for the items’ fair-market value at the time of donation. If the items are valued at more than $500, you’ll need to complete “Form 8283” and attach it to your tax return. Keep in mind the IRS will only allow deductions for items in good condition or better, so make sure your donations are in decent shape.
To help determine the value of your donated item, check out “IRS Publication 561: Determining the Value of Donated Property”. If you would like to claim items that you dropped off without receiving a receipt, you may do so as long as the items have a value of $250 or less. Otherwise, you’ll need a receipt from the charity to be able to claim the donation on your tax return.
Some people might think that mileage deductions are only available to individuals who are self-employed or in some sort of traveling sales role. Yes, the IRS does allow you to deduct miles driven for business purposes, but it also allows you to deduct miles driven for medical, moving, and charitable purposes.
The 2015 standard mileage rates for use of your car, van, pickup or panel truck are: 57.5 cents per mile driven for business purposes, 23 cents per mile driven for medical or moving purposes, and 14 cents per mile driven while serving and approved charitable donation. Be sure to keep track of your mileage throughout the year. Smartphone apps like “TripLog” can help automate the process and generate helpful mileage reports at the end of the year.
In 2015, Florida was ranked as the #6 most moved to state by the United National Movers Study. If you were one of the lucky ones that moved to our great state this past year, you may be qualified to deduct your moving expenses. These expenses include the cost of moving your household goods to your new location, traveling, lodging, and some storage fees. However, you do need to meet all three of the qualifications set by the IRS:
1) Your move must be closely related to the start of work. It’s not necessary that you find a job before moving, as long as you land something within one year of your relocation date.
2) You must meet the “distance test”. In other words, your new job location must be 50 miles further away from your former home than your previous job location. So, if your former home was 6 miles away from your old job, your new home must be at least 56 miles away from that same former home (which should be no problem if you moved to another state).
3) You must meet the “time test”. This rule states that you must work full time for at least 39 weeks during the first 12 months after you arrive in your new location. These 39 weeks do not need to be consecutive or with the same employer. Also, if you moved later in the year and aren’t able to satisfy the requirements of the “time test”, you can still deduct your moving expenses. But be prepared to pay back the deduction if you do not complete the remainder of the 39 weeks in the following year.
While maximizing your tax refund is awesome, make sure you spend that money wisely. Sure, a new 60” TV is nice, but the freedom from paying off a high-interest credit card is even better. Or, if you live paycheck-to-paycheck all year, but get a huge refund at tax time, you should consider meeting with your employer’s Human Resources department. By taking the time to properly adjust your dependents and withholding, you may be able to fatten your weekly paycheck and still receive some sort of refund at the end of the year.