Time to make good on your yearly New Year's resolution to not procrastinate and file your taxes early. The best reason to file early? An estimated 80% of taxpayers who file before the end of February get a refund. And this year, the average federal tax refund is expected to top $3,000. Still want to wait to file? I didn't think so.
According to the IRS, 92 million taxpayers claimed more than 700 billion dollars' worth of standard deductions, however some of those taxpayers left money on the table and missed valuable tax deductions and credits.
Before you file your taxes, here are some of the simple tax tips you don't want to miss.
1. Don't Forget About Reinvested Dividends: If you sold mutual funds, don't forget to add your reinvested dividends to your cost basis when you calculate basis in your stock. This will decrease the gain recognized on the sale of the funds and lower your tax liability.
2. Take the State and Local General Sales Tax Deduction: If you live in a state with no state income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington, or Wyoming), make sure you claim your state and local sales tax deduction. Even if you do live in a state with state income tax, a year of splurging may still give you a greater state and local general sales tax deduction. It's a tax deduction you don't want to miss.
3. Job Search Expenses: If you were in search of a job in 2011 like so many Americans, you may reap the benefits of tax deductions from job search expenses. As long as you were seeking a job in your same profession, you can deduct expenses such as resume preparation, career seminars, and even travel if the expenses are directly related to your job search.
4. Don't Miss Earned Income Tax Credit: The economy resulted in the loss of income for many. Without that income, you may now qualify for the Earned Income Tax Credit. The Earned Income Tax Credit remains one of the most overlooked tax credits, although it may give you a credit up to over $5,000 depending your filing status and family size!
5. Dependent Friends May Be a Tax Deduction: So your boyfriend has been out of a job and you supported him the entire year. You may be tired of the couch potato, but your support may surprisingly earn you an additional tax deduction. Although your boyfriend is not your "qualifying child", he may meet the "qualifying relative" test allowing you to claim him as a dependent. "Who can I claim as a dependent?" is one of the most frequently asked questions today, due to the economy and the changing dynamics of relationships.
6. Don't Forget Green Improvements: You replaced your old insulation with eligible energy efficient insulation, because you couldn't spend one more year freezing inside your own home. You may not have thought about the tax benefit of this improvement, but you may be able to take advantage of the Residential Energy Tax Credit worth up to $500 for insulation, roofs, or doors.
7. Use Tax Resources: There is do-it-yourself tax software available to guide you through tax deductions and credits so you don't miss them, as well as free tax resources to help you with your tax questions so you are not alone.
So, when do you usually file your taxes? Will you file early this year?
For these and more helpful tax tips that save you money, go to the Turbo Tax Blog.
Follow Lisa Greene-Lewis, CPA on Twitter: www.twitter.com/@TTaxLisa