Perhaps 2014 is the year you make a New Year’s resolution to plan throughout the year to lower your taxes. Here are three tax actions to take now in the beginning of the year:
1) Start tracking your actual vehicle expenses
The IRS lowered the mileage rate to 56₵/mile for 2014. That is 5₵ less than for 2013.
But you are not required to use the IRS mileage rate!
If the actual cost to maintain your vehicle is more than the .56/mile rate, you can use actual expenses as a tax deduction. To use actual expenses, you must record all gasoline, oil changes, repairs, tires, insurance, taxes & licenses, parking & tolls, etc.
To use 2014 actual expenses as a tax deduction, you must start gathering and organizing your receipts now. That is the only way to beat the limit imposed by IRS with the lower mileage rate.
2) Sign Up For Medical Insurance
The Affordable Care Act, or ObamaCare as it is commonly called, continues to roll out.
As Of January 1, 2014, you are required to purchase health insurance or face a tax penalty.
The penalty for 2014 is the higher of 1 percent of yearly household income or $95 per uninsured adult and $47.50 per child, up to $285 per family!
Make sure you have and maintain qualified health insurance. This includes qualifying employer sponsored plans or enrollment in the new health insurance exchanges.
3) Take a Fresh Look at Home Office Deduction
The IRS has made it easier to deduct home office expenses.
You may now elect a simplified method to calculate the deduction (as long as the other requirements are met). Simply multiply the square footage of the office by $5/sq.ft up to a cap of $1,500.
You can still use the traditional method in which you deduct the eligible portion of the actual cost of maintaining your home. To use actual expenses, you must keep the paid receipts for interest, real estate taxes, insurance, repairs, et al. If this old method produces a bigger deduction than the simplified method, by all means use it. To do so for 2014, however, you must start keeping good house records now.
But if you are intimidated by the record keeping demands of the past, don’t “leave the deduction on the table” anymore! Just use the new simplified method.
By: John J Kasperek, EA. John enjoys giving useful tips so people can prosper. Contact him to explore these or other tax saving strategies and have him & his talented staff prepare your 2013 business or individual tax return.