A Couple Little-Mentioned End Of Year Tax Tips
Around this time of year, besides the talk of holidays, a main concern is the upcoming tax season. This is the time when people (like me) start writing about tips for getting organized and taking those last-minute actions to improve your tax position. Many people advise about what you should do with investments, making an extra mortgage payment, donating to charity, etc. There are however two tips that go virtually ignored in many of these advice columns: using medical expenses and college tuition to your advantage.
Many people do not itemize, so this tip will not be of much help to them on a yearly basis. There are plenty of people, however, who do incur large amounts of medical expenses over the course of time who could make use of taking care of all of their procedures in a short period of time. You are allowed to deduct medical expenses on your 1040 that exceed 7.5% of your adjusted gross income. The problem is that for many people, their medical expenses just do not reach that lofty figure. But, if you were to time things correctly (if medically allowable of course) and group many procedures into one calendar year, you can take full advantage of this deduction. Things like braces, root canals, laser vision correction and non-emergency procedures can be coordinated so that get added to regular medical expenses to allow for the entire group to be applied to one tax year’s 1040 return.
The second tip is an extension of an already familiar deduction: the Hope/Lifetime Learning education deduction. What many people do not realize is that you can prepay education expenses in the current year for any program that commence within the first three months of the following year. Put in more simple terms, if you pay college tuition in December 2008 for any semester/trimester that begins by March 31, 2009 you are allowed to claim those expenses as a deduction on the 2008 1040. This may not be beneficial for everybody, as there are phase-outs and other limitation to the deduction, but you should consult your tax-preparer to see if you will qualify. baldness due to lipitor
As a side note, this is the precise reason why I am against do-it-yourself taxes whether using a pre-packaged software product, online template, or by hand. There are many nuances to the IRS tax code that are only known by experienced tax professionals. Those products such as TurboTax and Tax Cut are not advanced enough to “ask” or advise about these types of instances, especially since they are both after-the-fact products. Most tax professionals worth their fee will have already been in contact with their clients and advised them of all of the ways in which they could possibly reduce their tax burden (or increase their refund).
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