As it nears tax time, most of you are very aware of your tax burdens. What you might not be aware of are all of the nice tax breaks built into the system. Although many of those breaks are designed to directly benefit only the wealthy, there are several tax breaks available to working folks as well.
Claim Eligible Self-Employed Expenses
You self-employed folks in the UK can also claim some common expenses to get yourself a little break. Be sure that you deduct any advertising costs, business loan interest, postage, rent, travel expenses and internet costs. Don’t claim any expenses that weren’t used exclusively for business
Write Off Any Investment Interest
American readers who borrowed money and used the proceeds to purchase taxable investment assets should be able to write off the resulting interest, referred to as an investment-interest expense. You can deduct investment-interest expense to the extent of any taxable investment income from royalties, interest and short-term capital gains.
You cannot deduct any interest on loans used to buy non-taxable investments such as municipal bonds, however. So, if your investing strategy requires you to borrow funds, earn yourself a tax break by spending the loan proceeds to purchase taxable investments and use cash to buy non-taxable investments.
Deduct Alimony Payments
The IRS allows you to deduct any alimony payments that you pay in cash. Your former spouse must actually receive the payment and you and your former spouse cannot file a joint return with each other.
You cannot deduct any child support, non-cash property settlements or payments to your spouse for their part of any community property, however.
Claim the Child and Dependent Care Credit
You might qualify to claim the IRS’s “Child and Dependent Care” credit if you had to pay someone to take care of your dependent child aged 12 or younger while you were working. If you and your spouse are filing jointly, both of you must have been working or looking for a job.
The “Child and Dependent Care” credit can be good for up to 35 percent of your qualifying expenses, but this amount varies according to your adjusted gross income.
Write Off Any Gambling Losses
Casual gamblers can write off any gambling losses if their luck ran out last year. You can deduct losses only if you itemize your deductions. The amount you deduct cannot be greater than the amount of gambling income you report on the same tax return.
Yes, the IRS does want you to claim your gambling winnings, including any money you won from casinos, horse races, lotteries and raffles. Keep detailed records of your gambling losses and winnings just in case you are unlucky enough to get audited.
Get Your Cash ISA Tax Break
You readers in the UK can give yourself a tax break by purchasing an ISA, or an individual savings account. With interest rates at an all-time low, you can really maximize the return on your savings by using your entire ISA allowance.