Tax Deduction Checklist

The best tax deductions checklists are found in three places:

Your past years’ tax returns; With your tax professional; and Through an online tax website

Past Years’ Returns

Just by looking at the deductions you have been able to take in the past, you will get a good idea of what deductions you can take this year. If you had mortgage interest, real estate taxes, IRA contributions, and charitable contributions last year – you probably have them this year as well. The same is true of medical expenses, various taxes, that safe deposit box you keep, and if you are required to pay certain expenses, like alimony. Finally, any business deductions you have taken in the past, for a home office, travel, mileage, etc. is likely to follow a pattern you have created and budgeted consistently.

Tax Advisors

Tax professionals are great at helping you identify deductions for one time occurrences and helping you organize your records and thoughts on how to approach the deductions that are available. You may need advice on issues that you have never faced before and those that run the risk of gaining or losing large sums of money. If so, your tax advisor is a great resource for addressing these issues.

Online Help

TurboTax Online, for example, has exceptional checklists for going over everything you need to consider before preparing your return and making sure you don’t miss anything important. It asks interactive questions, points out possible deductions you may forget, and reminds of the things you need to have or consider when taking a specific deduction.

When planning your tax strategy for the year, you’ll be glad to know that you can significantly lessen (or even eliminate) your income tax liabilities if you know what deductions and credits are available to you. For example, retirement planning can have a net positive tax impact. Similarly, owning your own home has positive implications for you. And, although college is more expensive now than ever, you can send your children to college and garner substantial tax benefits at the same time.

Here are some things to consider:

Let’s assume for the purpose of discussion that you’re married, with three kids (two in college) and you’re employed full time. Your annual income is $76 thousand. And let’s assume that you are making these plans at the beginning of the tax year, so that you have an entire 12 months to implement it.

One significant tax break you can get is by putting money into a 401k Plan.

If both you and your spouse each put five thousand dollars into your 401k account, that would reduce your annual taxable income by ten thousand dollars. This means that your adjusted gross income is $66 thousand. That will yield a substantial tax savings. Another significant tax break comes to you when you buy a house — and itemize all your deductions.

Let’s say you paid mortgage interest to the tune of $16 thousand. In addition, you paid real estate taxes of five thousand dollars. You also made charitable donations totaling $3500 to your church, synagogue, mosque or some other eligible organization. For purposes of discussion, let’s say you live in a state that charges you income tax and you paid three thousand dollars.

Your itemized deductions equal $27,500. Now, your adjusted gross income is down from $66 thousand to $38,500.

If you claim 5 personal exemptions, your taxable income is reduced another $15 thousand to $23,500. Your income tax bill is going to be approximately three thousand dollars.

Now, let’s see if we can whittle that down some more. How about using some relevant tax credits? Since two of your kids are in college, let’s assume that one costs you $15 thousand in tuition. There is a tax credit called the Lifetime Learning Tax Credit — worth up to two thousand dollars in this case. Also, your other child may qualify for something called the Hope Tax Credit of $1,500. Consult your tax professional for the most current advice on these two tax credits. But assuming you qualify, that will reduce your bottom line tax liability by $3500. Since you owed three thousand dollars, your tax is now zero dollars.

Not bad!

Lastly, since we are planning this strategy at the beginning of the tax year, you should go ahead and adjust your withholding amounts.

Since you’ve effectively done the planning ahead to reduce your tax liability to zero, you can go ahead and adjust your withholding to zero as well. But don’t stop there: open up a Roth IRA (both of you) and put the excess cash there before you even have a chance to spend it. And if you have anything left over, set aside some money for your third child who isn’t due to enroll in college for a few years yet.

Conclusion

With some help from the Federal tax code, you can reduce your income tax to zero. It just takes some knowledge, planning and action.

Personal grants encompass a wide variety of many different programs which have been designed to meet very diverse personal needs. There are numerous reasons that people will find themselves in a crisis situation and it is comforting to know that funds are available to help them through these tough times. Grants can be either for a short term emergency basis, or structured for a more long-term situation. At present there are well over 5,000 private foundation programs which provide grants to individuals, as well as the many government personal grants which have been created specifically for veterans, seniors, disabled and those that need help the most.

Preliminary research will show you that just about every possible need will be covered in some way by the different types of programs available. There are far too many of them to list here, but just to give you some idea these are a small representation of what types of personal grants are available:

Housing Assistance – Rent – Mortgage Payments – Home Repair – Utility Bills – Public Transportation – Legal Services – Child Care/Day Care – General Living Expenses – Home Purchase – Medical Bills – Groceries – Car Purchase for the disabled – Clothing – Academic Tutoring – Fuel – Summer Camp – School Supplies – Extracurricular Activities – Real Estate Taxes.

Personal grants are obviously going to be made available only to those in need. This covers those that are out of work, who work part-time but earn insufficient money to cover basic expenses, and who are ill. US citizens are entitled to free personal grants which can range from $5,000 upwards to $450,000. There are many grant programs available for specific religious faiths, or for minority groups, Hispanics, unemployed, underemployed and so on. The private trusts and foundations give away over 17 billion dollars each year in personal grants. They are required to give away 5% of their money each year in order for them to maintain their “tax-exempt” status.

It is quite sad that so many people who would benefit so greatly by personal grants do not know that such programs exist. Each year billions of dollars worth of free grant money is distributed by the US government together with the private foundations. There are unfortunately many people that are too embarrassed to apply for personal grants, mistakenly believing that it is a sign of their failure. Some people are under the misapprehension that there is too much red tape involved, or that it just doesn’t apply to them. These people need to know that free personal grants are received by people from all walks of life in the US, who have temporarily fallen on hard times.

There are many grant directories listed on the Internet and this is a good place to begin your research on personal grants. In most cases you will be able to fill out an online application and full instructions should be provided to you at the time. Any US citizen or resident is eligible to apply for and receive either a federal government, or private foundation-funded personal grant. It is also important to know that this money is provided to people in need regardless of whether they have had to declare a bankruptcy, or have bad credit.