If you do itemize your deductions, you probably know that you must have documentation for your charitable contributions. If your contribution is $250 or less, a cancelled check will suffice but if your contribution is more than $250, you must have a receipt from the charity. But what about good deeds, like work in a local food kitchen where you’re giving your time, but also making food donations. That counts as long as you keep your receipts (and get an acknowledgement if over $250). Also, if you drive for charitable purposes, like delivering meals, your mileage is added to your contribution at 14 cents per mile.
Do you play the Lottery? If you do, and you win, be sure you keep those losing tickets too (yes, you will have losing tickets). Lottery (and any gambling) winnings are included in taxable income. You can’t directly offset your winnings with losses though. Your losses are included as itemized deductions (so you have to have enough total deductions to itemize) and you can only deduct losses to the extent of winnings.
Have you served on a jury? Many employers will pay their employees their regular pay while they serve on a jury, and the Court will also pay you for your service, although it’s generally a very small amount. Sometimes the employer will ask you to give the money you receive from the Court to them in exchange for your regular pay. Because jury duty pay from the Court is included in taxable income, you can deduct the amount you paid to your employer, so you’re not taxed on money you weren’t able to keep.
The last one I’ll mention this week is a significant change implemented in the 2017 Tax Act affecting the deduction for dependents. Previously each person in your family was an exemption, and your total exemptions were deducted from your Adjusted Gross Income. Now there are no exemptions, but in its place, we have tax credits for dependents. For any child under the age of 17, the child tax credit is $2,000, which is deducted from your tax liability. For any dependent age 17 or older, the credit is $500. And remember, this credit is for any qualified dependent, so children age 17 and older qualify but if you have an older relative that you’re caring for in your home, you get a $500 credit for that person as well.
Of course, this is not a complete list. I’m just trying to make you aware of some items that are easily missed or common errors. Over the next few months I’ll try to cover items that are useful and help you pay the least tax legally possible. As always, I am looking for article ideas that you would like me to cover. If you have an idea for a future article, or just have a topic you would like more information on, please send me an email.
At Faw & Associates, we are always available to answer any of your tax or financial planning questions. We are accepting new clients please contact us for an appointment.At Faw & Associates, we are always available to answer any of your tax or financial planning questions. We are accepting new clients please contact us for an appointment.