2013 ITEMIZED DEDUCTION Info

ITEMIZED DEDUCTION

How Home Ownership Can Benefit You When You File Your Taxes

Your mortgage interest, real estate taxes, and mortgage insurance premiums during the year, as well as any points paid at the time you close on your loan, can all be claimed as an itemized deduction on Schedule A. Itemized deductions are an alternative …
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Common convention refers to all factors that lower taxable income as “deductions.” However, paid tax preparer study teaches the existence of many expenses that adjust income regardless of whether taxpayers have itemized deductions.

The distinction is important because these adjustments – often called “above the line deductions” in tax preparation school – are available in addition to taking a standard deduction. Also, adjustments reduce adjusted gross income. Therefore, in addition to creating lower tax, income adjustments can help someone qualify for the itemized deductions that are limited by AGI.

Learning about adjustments to income begins with registered tax return preparer exam preparation. Especially common in today’s economy is deduction of moving expenses incurred to take a new job. This income adjustment is allowed for costs to transport household property and any packing materials. The deduction also includes a standard mileage rate for driving a personal vehicle to the new location as well as lodging during the trip. A tax return preparer course reveals the qualification for this income adjustment.

The move must occur because the new job is at least 50 miles farther from a former home than the old job was from the former home. An RTRP knows that the location of the new home is not relevant to the calculation.

An RTRP training course covers some other income adjustments. One is a deduction by armed forces reservists of expenses to travel more than 100 miles from home. These individuals are not subject to the limitations imposed on deduction of employee expenses that are itemized. Another profession benefiting from an income adjustment is teachers and other individuals who work at least 900 hours per year at a school. These employees can deduct up to $ 250 annually of their out-of-pocket costs for classroom materials.

Another adjustment to income is the amount of student loan interest paid during the year up to $ 2,500. In fact, taxpayers are entitled to this deduction even if their parents are paying the student loans. That’s important because the deduction is eliminated for taxpayers with higher incomes. However, the adjustment for student loan interest is not available for anyone who is claimed as a dependent on another person’s tax return or is married filing separately.

Parents who pay student loans for their children cannot take the income adjustment because only the students are legally obligated for payment of the interest. Fortunately, the IRS considers student loan payments made by parents as gifts to their children. The amount is too low for gift tax to apply. But, the consequence of receiving a gift and then having it pay a student loan means the interest is paid with the student’s money. Therefore, the procedure in a registered tax return preparer job is to adjust the income on the tax return of the student.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

ITEMIZED DEDUCTION

enlighten me.
In my example
i made $ 11600
and i put an itemized deduction of 1.

around what will my federal income tax rate be?

Answer by travelguruette
Itemized deduction of 1? Not sure what you did.

If you are single your standard deduction is $ 5340 or so. You would need to have enough itemized deductions to be higher than your standard deduction. Usually you would not have enough unless you own a home.

Answer by Judy
Do you mean that you put one ALLOWANCE on your W-4? That has nothing whatsoever to do with itemized deductions.

With an income of $ 11600, if you are single you will be in a 10% bracket, but that doesn’t mean you pay 10% on your entire income, just part of it.

Common convention refers to all factors that lower taxable income as “deductions.” However, paid tax preparer study teaches the existence of many expenses that adjust income regardless of whether taxpayers have itemized deductions.

The distinction is important because these adjustments – often called “above the line deductions” in tax preparation school – are available in addition to taking a standard deduction. Also, adjustments reduce adjusted gross income. Therefore, in addition to creating lower tax, income adjustments can help someone qualify for the itemized deductions that are limited by AGI.

Learning about adjustments to income begins with registered tax return preparer exam preparation. Especially common in today’s economy is deduction of moving expenses incurred to take a new job. This income adjustment is allowed for costs to transport household property and any packing materials. The deduction also includes a standard mileage rate for driving a personal vehicle to the new location as well as lodging during the trip. A tax return preparer course reveals the qualification for this income adjustment.

The move must occur because the new job is at least 50 miles farther from a former home than the old job was from the former home. An RTRP knows that the location of the new home is not relevant to the calculation.

An RTRP training course covers some other income adjustments. One is a deduction by armed forces reservists of expenses to travel more than 100 miles from home. These individuals are not subject to the limitations imposed on deduction of employee expenses that are itemized. Another profession benefiting from an income adjustment is teachers and other individuals who work at least 900 hours per year at a school. These employees can deduct up to $ 250 annually of their out-of-pocket costs for classroom materials.

Another adjustment to income is the amount of student loan interest paid during the year up to $ 2,500. In fact, taxpayers are entitled to this deduction even if their parents are paying the student loans. That’s important because the deduction is eliminated for taxpayers with higher incomes. However, the adjustment for student loan interest is not available for anyone who is claimed as a dependent on another person’s tax return or is married filing separately.

Parents who pay student loans for their children cannot take the income adjustment because only the students are legally obligated for payment of the interest. Fortunately, the IRS considers student loan payments made by parents as gifts to their children. The amount is too low for gift tax to apply. But, the consequence of receiving a gift and then having it pay a student loan means the interest is paid with the student’s money. Therefore, the procedure in a registered tax return preparer job is to adjust the income on the tax return of the student.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

In Part 1 of this series, we looked at adjustments and the special situations that save you tax dollars. In this article we’re looking at itemized deductions and in Part 3 we’ll look at exemptions.

Uncle Sam actually gives you a choice when it comes to some deductions – you can take a “Standard” deduction, or you can use itemized deductions. The standard deduction is a set amount based on marital status, age and blindness (really).

Let’s say you’re married and you file with your spouse. The standard deduction for a married taxpayer, under 65, who can see clearly, is $ 10,900. This is the standard deduction Uncle Sam “gives” you and everyone else like you.

Itemized deductions allow you to stand out from the crowd and subtract amounts for mortgage interest, charitable contributions, and health expenses.

The strategy here is to compare the value of the standard and itemized deduction. Then use the one with higher value to reduce your tax bill.

Let’s look at the best possible itemized deductions you can have.

Mortgage Interest
Most taxpayers that use itemized deductions have mortgage interest.

With the current First Time Homebuyers Tax Credit of $ 8,000, there has never been a better time to buy a home. If you qualify as a first time homebuyer (haven’t owned a home in the last three years), Uncle Sam could put up to $ 8,000 in your pocket, plus you still get to deduct your mortgage interest (and property tax).

And be sure to look at your closing statement for additional interest (and taxes) paid at closing. These are part of your itemized deduction for mortgage interest in the year of purchase.

(e.g. buy the house in 2013 – expenses from the closing statement help with your 2013 return.)

Charitable Contribution
Charitable donations generally come in a close second to mortgage interest for popularity and frequency of use. A qualifying donation is money given to any 501-c-3 organization or church.

Each year you can also give away non-cash items like clothes, appliances, tools, etc. up to a value of $ 500 (minimum documentation is required). Every tax payershould take this deduction each year and support the charity of your choice. If you make major (worth over $ 500) non-cash donations like a car, common stock, furniture, etc., with proper documentation, this deduction can be worth thousands.

Of course, money you give to charities also counts as a donation. Just be sure you get a receipt. When you plan your giving using a credit card for monthly donations, you can use your credit card statement as your “backup receipt” if you lose the one the charity sends you.

Property Tax
Congress has added a little “sweetener” for this tax year: even if you do not itemize, real estate tax is deductible. This means you get your standard deduction plus an additional deduction for property tax.

Normally, real estate tax can only be taken when you itemize. This deduction will be helpful to non-itemizers.

Medical Expenses
Only amounts over7% of adjusted gross income (AGI) are deductible (unless you’ve set up an HSA – see Part 1 of this series). For example, if AGI is $ 10,000, only medical expenses over $ 700 will be deductible. If you pay health insurance, have high co-pay amounts or have major medical bills, this deduction may be possible.

Employment Costs
Do you have to spend money for your job that doesn’t get reimbursed? You may be able to deduct these expenses.
These costs include meals, vehicle expenses, parking, travel, etc. Most businesses reimburse employees for these expenses, but if your employer doesn’t, it’s deductible (subject to a 2% claw back).

Be sure to join us for Part 3 of the Take It Off series when we’ll look at exemptions and how you can make the most of them.

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