Taxes…we all have to pay them, but nobody wants to pay more than their fair share. Sadly, many of us do end up paying more than we should, because we overlook deductions that we could have taken. This is the bottom line on the most overlooked tax deductions.
|Bottom Line/Personal:||Tom, what is the number-one thing that people forget to deduct on their taxes?|
|Thomas J. Henske, CFP ||There are a couple of things, but the biggest one that I see is charitable contributions, believe it or not. And it’s not so much the checks that people write—they usually have the itemization of that—but the things they give away, for example, to Goodwill. There are certain deductions that they’re missing from that.|
|Bottom Line:||That sounds like just the very beginning. There are probably some other things that people forget. What are those?|
|Thomas Henske:||Well, for example, refinancing a mortgage. A lot of us have refinanced over the last couple of years, and the points that you pay to refinance that mortgage are deductible. How about when you fly for business? How many times have you paid for your baggage over the last six to 12 months? Well, that’s deductible. And then finally, when you have dividends that are reinvested into some of your stocks—that raises your basis and lowers your tax gain. We see clients miss that all the time.|
|Bottom Line:||Question: Are there any other areas where people are just basically paying more than they need to in taxes?|
|Thomas Henske:||There is one. It’s the charitable giving. When they are giving to charity, most people will pull out the checkbook, write a check and send it off. But there’s a much better use of money, which includes giving appreciated securities to that charity. Let me give you a good example. Facebook went public, and let’s say you bought $1,000 worth of Facebook shares and now they are worth $2,000. Instead of writing that check to the charity, why don’t you just take the security and have it transferred over to the charity. Why is that? Think about it. The charity will get the full $2,000 value of the gift…you get the full $2,000 deduction. Everyone wins.|
The Bottom Line on maximizing tax deductions—make sure that you’re not overlooking expenses related to charitable donations. It doesn’t have to be just the checks you’ve written. It can be the things you’ve given, or you can donate stock. Also, check in to business-related travel and moving expenses—they’re often overlooked.