Tax saving strategies during holiday season
15th November: Holiday season is approaching fast but it could also mean numerous tax deductions.
Let us see how can we act smart to reduce tax deductions to the minimum while making optimum use of this giving season.
Selecting a charity—What a good way to avoid tax deductions than to give away a part of your money to some charity organization be it schools, churches or any other charity groups. The only thing is to make sure that the charity you are going to choose is exempted from taxes under the IRC’s (Internal Revenue Code) section 501©(3).
• Do your calculations—Making contributions to any charity is good, needless to say. However, you need to take care to note your deductions as the amount in excess of the market value of the received cash when you get services, merchandise or any goods in return.
According to author of ax Deductible Travel and Moving Expenses, Julian Block, fair market value is applicable to cloth donations too. So, donation of a coat bought by you last winter for a value say around $150, would fetch a value of $30 at any thrift shop. So, $30 will be the amount contributed by you.
• Itemizing deductions on appropriate form—You must itemize all of your deductions on Form 1040 of Schedule A if you want to become qualified for any charitable tax deductions. Block adds that we can itemize mortgage interest(on a home), state income tax or even medical costs in excess of 7.5 percent of adjusted gross income.
• Get receipts—Getting proper receipts can facilitate in getting cash deductions. So, do keep a record of the transaction including that from one’s paycheck, bank or any written proof especially if money contribution are around $250 or higher. Donating cash or items having value greater than $5,000 should be followed by filling Section B-Form 8283.
• Donations now or later—Its up to you to decide whether you want to make donations this year or next year keeping in view your financial condition.
• Deductions for transport—If you are working as a volunteer for any recognized organization, then you can get tax deductions for the oil and gas costs for travelling to and from your work. A record of costs spent on using public transport for travelling must be kept for getting claims.