In life and in business there is nothing more bittersweet that a missed opportunity. This is especially true if you are not taking advantage of the tax deductions and credits that you qualify for. Whether you are blissfully unaware or kicking yourself in the pants for missing a credit or deduction opportunity last year, your focus should be on reducing tax liability and claiming every opportunity that the IRS and Utah State Tax Commission has available to you for the current tax year.
There are quite a few deductions and credits that both individual wage earners and businesses can claim to lower tax liability. Just as your life story and business opportunities shift and change from year to year, so will federal, state, and local tax laws. Here are a few ways to ensure that you never miss another money-saving opportunity at tax time:
- Establish a Comprehensive Tax Plan for your business in Utah.
- Retain the Help an Experienced Utah Tax Attorney for expert guidance and tax advice.
- Review Our 5 Secrets to Minimize Tax Liability in Utah listed below to find and apply the top credits and deductions in time for the upcoming tax season.
Get the peace of mind that you can only get from having a local, compassionate tax attorney in your corner at tax time. Eric Froisland has been a trusted tax attorney in the Beehive State for 15+ years. Call Eric today at 801-290-2130 to review your current person or business tax situation, address your options, and create a customized tax plan in time for tax season.
Itemize Utah State Sales Tax
Itemizing your state sales tax is a good idea for those who may have deductions over $10,000, which is the federal tax deduction cap for state and local taxes. Because this amount is the maximum from all deductible sources, it is an ideal solution for major, high-dollar purchases like vehicles.
Keep in mind that in Utah, whether you choose to itemized state sales tax or use the standard deductions, you will be required to use the same method for your federal tax return.
Contribute to a Retirement Account
There is no real secret here, contributing to a retirement account is one of the best ways to reduce your federal tax debt. This is because contributions to any traditional workplace 401(k) or IRA account are deducted from your taxable income, which in turn, reduces your federal tax debt. In addition, contributions to your IRA account can be applied right up until the income tax filing deadline of each year but traditional 401(k) contributions must be made by the end of the calendar year.
Deductions for Military Members
Active duty military members should be taking advantage of the special tax breaks covered in the IRS Publication 3 that include an automatic extension to file and pay taxes for those serving in a combat zone and these beneficial deductions:
- Combat Pay Exclusion applies to military pay while serving in a combat zone.
- Enlisted members qualify for tax-free income for each month served in combat.
- Commissioned officers’ combat pay is limited to the highest rate of enlisted income with the addition of imminent danger/hostile fire pay for each month served in a combat zone.
- A Uniform Deduction includes the cost and upkeep of on-duty uniforms. The deduction is only applied to costs that exceed any allowance provided for these items.
- The Moving Expense Deduction generally applies to moving expenses that are not reimbursed for a permanent change of station move.
- Reservists’ Travel Deduction can be used for travel expenses that are directly related to reserve duty. This deduction does not need to be itemized but only includes costs that are not reimbursed from travel more than 100 miles away from home.
- Tax Deductions for a Civilian Job Search can cover some job search expenses like resume preparation, job placement agency fees, and travel costs. Some post separation moving expenses may also qualify as a tax deduction in the civilian world.
Many people who gift monetary donations through payroll deductions, cash or online deposits account for their favorite charitable organizations generally have those records ready at tax time but tend to overlook the donation of goods and clothing. While you may not keep track of these sporadic, non-monetary donations, you should start now. They can really add up over a year’s time, giving your itemized deductions a worthwhile boost. You’ll just need to remember to take a little extra time to get receipts for these donations.
Higher Education Tax Credit
To offset the cost of higher education like tuition, books, supplies, equipment, fees – the federal government offers the following valuable tax credits for college and advanced job training:
- The American Opportunity Tax Credit can be claimed for the initial four years of college for students working toward a degree or equivalent credentials. This credit has a maximum of $2,500 per student, per year. If 40% of the credit exceeds the cost of your tax debt, you may be refunded up to $1,000.
- The Lifetime Learning Credit provides an incredible tax credit worth up to $2,000 per year for adults to improve their job skills through education at any college or training with a career school.
Every student should be taking advantage of these tax credits, even if they hadn’t planned on filing a tax return because of their income level. Because who doesn’t like to get an income tax refund?