Here are some easy and basic ways to lower your tax bill. These are both business and personal tax tips.
Claiming Rents and Personal Housing
Occasionally people rent out individual rooms in their house while living there themselves. While you can normally take a simple rent deduction when you have a renter, it becomes much more complicated than that when you own and live in a house where someone is renting a room. In this case, you can deduct home repairs and utilities (in addition to the 3.64% you can claim for depreciation). However, a key point to remember is that you cannot claim a tax break for your own personal space, making personal bedrooms and common space off limits when it comes to taking a tax deduction.
Tax Breaks for Job Searching
When you do go off looking for a new job, the money spent searching can actually be counted as a tax deduction. Things like transportation, resume preparation, career coaching, or any other items related to the job search that cost money qualify as tax breaks. However, the fine print says that the total cost of the job search must surpass 2% of your adjusted gross income before it can be counted as a deduction. If your new boss doesn’t pay for your move, these costs can be deducted as well. This moving expense deduction ignores the 2% rule but requires that you are moving at least 50 miles away from your former residence.
Simpler Home-Office Deduction
New changes to the home-office deduction have made it much easier to determine the amount of money you can save. To calculate the deduction in 2012, you had to compare the ratio of office space to the total area of your house. This ratio was then used to calculate all other deductions (i.e. rent, power, phone, etc). In 2013, the IRS offers a simpler calculation of $5 per square foot, up to $1500. While it may be a simpler to calculate the deduction, it actually isn’t simpler to get it. Be careful of what you call “office space” for the IRS is ready to penalize offenders!
Tax Breaks for Support of Parents or Adult Children
A few million young adults (under 34) cry out that jobs are difficult to find. More and more parents are finding themselves supporting their jobless children. The silver lining is that, if you support them, you can claim them as dependents. If the young (18-34) adult paid for less than half their support, you can claim the tax break. This same tax break is available for taxpayers who are supporting aging parents.
Medical Expense Deductions
It has become even harder deduct medical expenses. In order to claim the deduction for medical expenses in 2013, the total must exceed 10% of your AGI (it was 7.5% in 2012). The good news is that medical expenses aren’t restricted to just hospital and doctor visits. Home renovations, such as a therapeutic pool for your back, that are made to accommodate a health complication can go towards the medical deduction as well. However, it is important to be able to link a renovation to an actual health concern before you count it as a medical expense.
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