By Natalie Pace
Don’t e-file your return before reviewing the following tax tips. You might be overlooking thousands of dollars in tax credits, retirement account contributions and more. The Obama Administration has given Americans big tax incentives for going green, so if you made any energy efficient improvements, you could qualify. And if you didn’t in 2010, but have been wanting to, most green incentives are still available in 2011.
- IRA Contributions: You can still contribute to your IRA and receive credit for 2010, up until April 15, 2011.
Learn more about contributing to your IRA NOW on the IRA contribution page at IRS.gov. If you use a software program, like Turbo Tax, they will automatically encourage you to make your IRA contribution before completing your tax form. Your accountant is likely doing the same, and it’s an excellent idea. (Simply search for IRA on the IRS.gov page.) Note that Roth IRA contributions are not tax deductible.
- Charitable Contributions. Your charitable contribution is tax deductible, if you file the right form. While contributions to the Japanese earthquake, tsunami and nuclear crisis may have to be declared on the 2011 tax return, if you donated to Haiti last year, that can and should be included in the 2010 tax return.
- Health Savings Accounts. Here’s another way to increase your assets and beautify your bottom line, while giving less to Uncle Sam AND the insurance company. Health Savings Accounts work best for healthy people who have the ability to purchase catastrophic health insurance, while contributing to a tax-deductible retirement plan that can be invested for gains. Catastrophic insurance could save you hundreds of dollars in insurance premiums per month, some of which can be deposited into your HSA for investments and gains that will eventually become part of your retirement strategy. If you don’t need to dip into this account, it rolls over year after year until you retire. And in the meantime, you also get a write-off for contributing and are not taxed on gains you might make through investing the money. You must be a “qualified individual,” but opening a HSA through a discount brokerage, like TD AMERITRADE or Schwab, is easy. To learn more, visit IRS.Gov and enter Health Savings Accounts in the search box.
- Free Federal Online Filing is the easiest way to do your taxes. For a list of qualified software companies, click on the FREE File icon on the home page at IRS.Gov. Many of these programs ask as many questions as most accountants and aim to include the deductions you qualify for. And it’s FREE for low-income easy-filers.
- Education. You may be able to deduct education costs for yourself and/or a student in your immediate family. You may also be able to take an early distribution from an IRA without paying the early distribution penalty and additional taxes, if the withdrawal was made to cover a qualified education expense. And if the education is work-related, you may qualify for a business deduction. Most of the benefits apply to higher education. For additional information, read publication 970 at IRS.gov.
- Electric Vehicles and Energy Efficiency. If you purchased an EV, made energy efficient improvements to your home (like insulation or window improvements) or installed solar or wind energy products, you could qualify for a quite large tax credit. EV credits go up to $7,500 and wind/solar power products can be as high as 30% of the purchase price. For more information, go to the IRS Tax Tip # 2011-49, which was issued on March 11, 2011. If you want to buy an EV, but haven’t yet, this tax credit is good now through 2014, or whenever the auto manufacturer sells 200,000 vehicles, while the Residential Energy Efficient Property Credit is good through 2016.At $4.40/gallon, it costs $66 to gas up, whereas recharging an electric car costs about $5. The Tesla Roadster can go 244 miles on a charge (according to the EPA). So, $5 is equal to a $66 tank of gas. If you gas up once a week, you’re spending $3500 annually, which could be replaced with a bill of $260. Combine that with up to $7500 tax credit for purchasing an EV and you get your dough back quite fast.
- FAQs. Wonder what tax laws have changed this year? What age your kids must be before you can no longer declare them? If you can claim a college student as a dependent? Check out the Frequently Asked Questions page of IRS.Gov. Again, remember that the online tax services update their software annually to reflect changes in the law, so if you are using one, it’s much more time efficient than trying to read all of the fine print on your own.