Marc A. Hebert's Money Sense: It's tax time once again and reducing liability is key
THE DEADLINE FOR filing taxes is a little more than a month away. If you're procrastinating, we thought we would get you started thinking about your taxes with some tax tips. These might help reduce your tax liability for 2016, so are well worth the effort to review.
Out-of-pocket charitable deductions: It can be tough to think of all the charitable gifts you made during the year. Sometimes charitable gifts are made through payroll deductions, so don't forget to check your December pay stub. You might be able to deduct the smaller out-of-pocket amounts as well. For example, the stamps you purchased for a school's fundraiser. If the contribution totals more than $250, you will need an acknowledgement from the charity. You also can deduct 14 cents per mile, plus parking and tolls paid, in conducting your philanthropic work.
Job-hunting costs: If you are looking for a position in the same line of work as your current or most recent job, you can deduct your job-hunting expenses as miscellaneous itemized deductions subject to the 2 percent floor. You can't deduct expenses for a job search in a new occupation. You don't even have to get the job to take the deduction. When reviewing your job-hunting costs, don't forget to include such things as employment agency fees, cost of printing resumes, business cards, postage, cab or Uber fares, and transportation expenses.
Military Reservists' travel expenses: Members of the National Guard or military reserve may write off the cost of travel to drills or meetings, provided they travel more than 100 miles from home and be away from home overnight. People who qualify may deduct the cost of lodging and half the cost of meals, plus an allowance for driving their car to and from drills.
Refinancing points: When you refinance a home loan, you might be able to deduct the points on the new loan over the life of that loan. For a 30-year mortgage that is 1/30th every year, not much, but every little bit can help.
The year you pay off the loan or sell the house, or refinance again, you can deduct all the undeducted points. There is an exception. If you refinance a loan with the same lender, you add the points paid on the latest loan to the remaining points from the previous refinancing, and then deduct the amount over the life of the new loan.
State tax paid last spring: Perhaps last year when you filed your 2015 return you owed state income taxes. As these were paid in 2016, you are entitled to a state tax deduction on your 2016 return for that amount. These go along with any state income taxes you had withheld during 2016, or estimated taxes you paid during the year.
Reporting a state Income tax refund: There is a line on the tax form for reporting a state income tax refund. It might seem logical that any state income tax refund you received goes there. This isn't necessarily so. If you did not itemize your deductions on your previous federal return, then the state tax refund is tax-free.
If you did itemize, part of it might be tax free. Refunds are partially taxable if your itemized deductions last year exceeded your standard deduction by less than the amount of the refund.
As with any deduction you take on your tax return, just be sure to keep logs for the mileage and receipts for the rest to support your numbers. You can't take a deduction for expenses that are reimbursed. It is also wise to consult your personal tax adviser for the rules relating to your unique situation.
Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to him at email@example.com. Your question and his response might appear in a future column.