- Don’t miss out on available tax deductions and credits to reduce your tax bill.
- Before you file your income tax returns, make sure you’re utilizing the tax deductions and credits available to you.
Contributions to IRAs
You have until April 18, 2017 to make your 2016 IRA contribution up to $5,500 or $6,500 if you’re 50 or older. You may be able to deduct some or all of your traditional IRA contribution, depending on certain income limitations and whether you or your spouse participate in a retirement plan at work (Roth IRA contributions are not deductible).
It’s not just charitable donations that are deductible. You may also be able to deduct the cost of certain expenses incurred when you volunteer for a qualifying charity. Certain travel costs and car mileage are examples of possible deductions.
Are you, your spouse, or a dependent paying tuition and fees for higher education? You may be able to claim the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC) for qualifying expenses. Tax credits like these are particularly valuable because they can be a dollar-for-dollar reduction of your tax bill.
If you use part of your home for business, you probably already know you may be able to deduct a portion of expenses, such as mortgage interest, insurance, utilities, repairs and depreciation, for the business use of your home. The calculations can be complicated, though, and some people don’t bother. Starting with the 2013 tax year, the IRS has offered a simplified option for calculating the business use of your home. So if you’ve been avoiding this, you may want to take a closer look this year. See irs.gov for more details.
Contributions to 529 plans
Contributions to a 529 college savings plan are not deductible on your federal tax return, but many states do allow deductions or tax credits on state tax returns. Make sure you double-check the rules for your state.
Alternative Minimum Tax (AMT) warning
High-income taxpayers may be subject to the AMT and, as a result, are not eligible to claim certain deductions. Some of the deductions disallowed under AMT include state and local taxes and property taxes. Ask your tax advisor for details.
Make sure you don’t miss out on available tax deductions and credits to reduce your tax bill. Your Ameriprise financial advisor and tax advisor can help you determine the right tax strategies for your unique situation and financial goals.
Editor’s Notes: We thank Joanne S. Reilly, CFP®, APMA®, CDFATM Financial Advisor, Joanne Reilly and Associates – a financial advisory practice of Ameriprise Financial Services, Inc. and an Ameriprise Platinum Financial Services® practice. Visit Reilly on her website at Joanne Reilly and Associates, on Facebook and on Linkedin.