By Gregory Roberts
The IRS recently announced that the first day that it will start accepting 2013 tax returns is January 30th of 2014. The delay was due ostensibly to the IRS shut down that occurred in early 2013. In this week’s column and next, we will review some often overlooked and, sometimes, unknown tax savings tips that could save you a bundle.
If you were a job hunter in 2013, you may deduct job-hunting costs as itemized deductions if you itemize your deductions, and this applies even if you didn’t find a new position. These expenses would be includible as “miscellaneous expenses” and the total of all such expenses in this category are only deductible to the extent that they exceed 2% of your adjusted gross income. Includible expenses would be mileage (56.5 cents per mile), plus tolls and parking; food and lodging expenses if you had to travel away from home; printing costs; and employment agency fees.
If you have mutual funds as part of your taxable investment portfolio, you probably have the dividends that you receive each year reinvested by using those dollars to purchase additional shares of your mutual fund. Bear in mind that those reinvested dividends are taxable to you each year, but increase your basis in the fund for tax purposes. As a result, when you sell those shares, your purchase price would be increased by the sum of all reinvested dividends, and this fact would decrease your capital gains tax or increase the amount of your loss. If you don’t know what your current basis is, call the fund’s customer service line to find out. Unfortunately, mutual funds did not have to keep track of your basis prior to 2012, but most of the larger fund families can provide this information to you, or at least provide you with the amount of reinvested dividends for each year of your participation.
If you decided to go back to school in 2013, remember that you may be eligible for a tax credit known as the Lifetime Learning Credit. The credit is 20% of the amount you spent up to $10,000 for post-high school courses that provided you with new or improved job skills. This credit applies even if you are retired and took classes, for example, at Athens Tech, UGA, Piedmont or Gainesville College.
If you are married, filing jointly, the credit begins to phase out as your Adjusted Gross Income exceeds $107,000. For single filers, the credit begins to phase out at $53,000 of AGI.
If you are self-employed and are flying on business, you may deduct those nettlesome baggage fees as part of your travel expenses on your Schedule C. Remember that every little bit helps.
If you started to work in 2013 and incurred expenses to move to your first job (part-time and summer work do not qualify), those moving expenses are deductible. Unfortunately, job hunting expenses for your first job are not deductible, but you can deduct moving expenses even if you don’t itemize your deductions. To qualify, your first job must be at least 50 miles away from your old home, and you are entitled to deduct those expenses that you expended to move you and your household items. If you traveled in your own vehicle, you may deduct 24 cents per mile, plus and parking fees or tolls.
Finally, if you paid your child’s student loan interest, the IRS takes the view that you gave the money to your child, who in turn paid the interest. So, if your child is not claimed as your dependent, he or she can deduct up to $2500 of student loan interest paid by the parents. Moreover, the child does not have to itemize to claim this deduction. Mom and Dad are out of luck deduction-wise, since they were not liable for the debt.
Got a financial planning question for Greg? You may email him at firstname.lastname@example.org
Greg Roberts is a graduate of Clemson University with a B.S. degree in Industrial Management. He also holds an MBA from the Wharton School at the University of Pennsylvania. With more than 35 years of financial and estate planning experience, Greg is a • Certified Financial Planner™ • Chartered Life Underwriter • Chartered Financial Consultant • Certified Employee Benefit Specialist • Expert with a Certificate in Long Term Care • Enrolled Agent, licensed to represent taxpayers before the IRS. Full disclosure: he's also the older brother of Patch editor Rebecca McCarthy.