With just days left of 2012, there are still some tax strategies you and your business can put in place to make sure you don’t over pay your tax bill. Here are our favorite tips so you won’t become one of the statistics.
Section 179 Deduction. If you acquired assets for your business in 2012, you may be able to deduct up to $139,000 of the cost of qualifying new and used business equipment placed in service in 2012.The Section 179 deduction is scheduled to drop significantly to just $25,000 in 2013 unless Congress intervenes. In 2011, the deduction was $500,000 of qualifying new and used assets. Keep in mind, your business must turn a profit in 2012 in order to take advantage of the deduction. You can read more about our Section 179 advice here.
Reinvested Dividends. Although this isn’t a deduction or tax credit, according to Kiplinger this is an “important subtraction that can save you a bundle.” If your mutual fund dividends are automatically used to buy extra shares, your tax basis in the fund is increased with each new reinvestment. Kiplinger advises that investors be careful not to forget including the reinvested dividends in your tax basis—failing to do so may result in double taxation of the dividends.
American Opportunity Credit. If you have a child in college then make sure you understand whether the American Opportunity Credit applies to you. Under the credit, taxpayers can get a reduction in their tax bill of up to $2500 per student provided the tax filers have an adjusted gross incomes of less than $80,000 a year (if single) or $160,000 (if they file jointly). An eligible family with two kids in college could get a tax credit of $5,000. Best part about the credit is that it covers all four years of college. In order to get the credit, you will need to fill out IRS form 8863.The tax credit is set to expire at the end of 2012.
Student Loan Interest. If you are paying back your child’s student loan, and your child is no longer a dependent, your child is eligible to deduct up to $2500 of student loan interest you paid. However, parents can’t claim the interest deduction since they are not liable for the student loan debt.
Medicare Premiums for Self Employed. If you own your own business and are qualified for Medicare, you can deduct the premiums for Medicare Part B and Medicare Part D as well as supplemental Medicare (medigap) policies. According to Kiplinger, “you can’t claim this deduction if you are eligible to be covered under an employer-subsidized health plan offered by your employer.”
Retirement Accounts. Taxpayers have till April 15, 2013 to set up a new IRA or add to an existing IRA and have it count for your 2012 tax return.
Small Business Health Care Tax Credit. Small businesses that pay at least half of your employees’ health insurance premiums may be eligible for a tax credit of up to 35 percent of the premiums paid. You can find more information at the IRS web site.
Storm Damage Tax Breaks. If you sustained property damage this year from natural disasters such as hurricanes, floods, blizzards, tornadoes and earthquakes, your losses may be deductible if they are not reimbursed by insurance reports Joy Taylor for Kiplinger. However, to claim the deduction, if your property is insured you must file a claim before taking the deduction. Kiplinger created a calculator to help figure out your storm damage deduction.
Baggage Fees. Did you travel on business in 2012? If you are self-employed you may be able to deduct these fees. Make sure to track these fees and add them to your deductible travel expenses.
Home Energy-Saving Credit. This credit is still available contrary to what many taxpayers may think. While it is true you can no longer get a credit for windows, doors, air conditioning, and insulation, you still can get a 30% refund of the cost of “installing qualified residential energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines” reports Kevin McCormally for Kiplinger.