As we are getting into the tax season full swing, there are some things you should be aware of to help you lower your taxes owed. For example, there are a number of things that help reduce your gross income as follows:
- Contributing to a traditional IRA. The full contribution up to your limit is an adjustment to gross income
- Nonpassive losses from S-Corporations and partnerships.
- Student loan interest is deductible up to a certain income threshold.
For your itemized deductions, don't forget to include these things:
- In the medical section, long term care insurance and insurance premiums that have not been reimbursed by your employee are deductible from this formula (AGI * 7.5%). Whatever this formula calculates to, you would subtract the total premiums/long term care insurance from it which would give you your itemized deduction in the medical section.
- Any unreimbursed employee expenses are deductible as a miscellaneous itemized deduction reduced by (AGI*2%). This also includes business mileage.
Additionally, this year, the Affordable Care Act implemented a penalty on page 2 of the 1040 which is based upon your percentage of AGI. If you do not have healthcare, you will be required to pay this in addition to your regular tax due. It is not reduced by a percentage. Make sure that if you do have healthcare, that you check the box stating that. Otherwise, you will owe the penalty.