It might be months before the tax deadline, but it’s not too early to think about deductions and credits, according to local tax professionals.
Paul Wade, a partner with Serotta Maddocks Evans CPAs, said there are several deductions that many taxpayers can qualify for if they plan and take care of a few details.
For those paying taxes in quarterly estimates, Wade said to be sure to send in the fourth quarter state estimate before the end of the year rather than the Jan. 15 deadline because it is deductible from federal returns in most cases.
“Individuals should make charitable contributions before year end rather than waiting to early January since they will be deductible this year rather than next,” he said.
Certain deductions are available only when they exceed adjusted gross income thresholds. Medical expenses that exceed 7.5 percent of the AGI are deductible, for example, but unreimbursed, work-related expenses are deductible only up to 2 percent of the adjusted gross income.
“It can be beneficial to bunch these deductions in one year to make sure the threshold is crossed and amounts are deductible,” Wade said.
Jerry Brigham, an accountant for more than 20 years, said the biggest key to claiming deductions and credits is having the right paperwork in order.
“The biggest deduction most people use is their mortgage interest payments,” he said.
To claim that deduction, taxpayers must have their mortgage interest statement for 2011, and all property taxes need to be paid on the property.
Brigham also emphasized the importance of gathering receipts and documentation for cash and noncash charitable donations. Cash contributions in excess of $250 require documentation from the organization, and noncash contributions in excess of $500 require documentation.
Jimmy Buchanan with Rhodes Murphy said he recommends people scan their receipts and financial documents into the computer to stay organized.
“It takes up less space, and it’s easier to keep track of that way,” he said.
Buchanan said to go ahead and get the ball rolling if any receipts or documentation need to be tracked down for charitable donations. The holiday season can mean people are in and out of their offices, and getting the documentation might take longer than usual.
“It would be best to go ahead and get everything sooner than later,” Buchanan said.
All of this documentation might seem excessive, but Buchanan said the days of just using a bank statement to file deductions are gone.
“Just a bank statement isn’t enough anymore,” he said. “You have to get that documentation from the organization.”