Don’t Miss Out on Any 2016 Tax Deductions
Many people miss out on taking all the deductions they’re entitled to. Poor record keeping is often the culprit, as well as not knowing what’s deductible. Sometimes it’s just procrastination. I advise:
Deduct every dime you give to charity. Most people who itemize deductions underreport their charitable contributions because they don’t keep records throughout the year. Missing many small donations can be costly.
If you dropped off a bag of clothing at a local charity or gave them $5 at the cash register of your grocery store, make sure to track these contributions so you get the highest tax benefit possible..
Donations to eligible nonprofits, religious organizations, and government organizations (such as a school or public library) are deductible. Especially if you give cash or goods, get receipts from the organization. Using software such as Quicken makes it easier to log donations.
Drive down your taxes. You can use a standard mileage rate of 14 cents a mile to figure your vehicle deduction for miles driven in service to a charitable organization. For instance, you can deduct mileage for driving to a shelter to serve meals to the homeless. You can deduct parking fees and tolls too, she says.
Donate securities to charity directly. If you own appreciated securities in a taxable account, consider contributing some of them. If you contribute a stock, bond, or fund with an unrealized long-term capital gain, you can take a tax deduction for the value of the security as of the date of the contribution, while avoiding paying capital-gains tax. Always contribute the security directly.Never sell a security, pay tax on the capital gain, and then donate the proceeds.
Home sale—be sure to add improvements to your basis. If you’ve sold your home at a gain, you may exclude up to $250,000 of the gain if you’re single or $500,000 if married filing jointly. It must have been your main home during at least two of the last five years. When calculating the gain on your home, you determine the difference between the proceeds of your sale and your basis. Your basis includes what you originally paid for the home, plus any improvements you made. Improvements include big items such as an addition and also smaller items such as a fence. You can also add to the basis the agent’s sales commission and some settlement fees and closing costs such as legal fees, recording fees, and survey fees. Keep clear records to substantiate your basis in case the IRS ever audits you.
Add reinvested dividends to your basis for securities. When you reinvest a dividend in a stock or a fund, make sure to add this amount to your basis in the security. Every brokerage firm will now do this for you automatically, but if you own stock directly, you may have to do it yourself. By tracking the basis, you can reduce your capital gains tax if you sell the security at a higher price later.