taxes from A to Z: ABC|
Doing your taxes is not as easy as ABC, but these
alphabetical tips could make the process less difficult and save you some money,
too. Here's the start of some A-to-Z tax opportunities to take or pitfalls to
deduction -- This special group of deductions
is a great time and money saver for many taxpayers. Not only do
you get to deduct things such as alimony paid, some college costs
and some financial account penalties you paid, you don't have to
mess with Schedule A and itemizing to claim them. Technically, they
are adjustments to your income. They help reduce your total earnings
to the amount upon which you ultimately figure your tax bill --
your adjusted gross income. The lower your AGI, the less tax you
should owe. And the name? These dozen or so deductions are at the
bottom of page one of the long Form 1040, just above that page's
last line, so they are literally "above the line."
-- Before something can be taxed, you (and the Internal
Revenue Service) must know its basis, or what it's worth. Basis comes into tax
play when you sell an asset and you must determine if you owe any taxes on it.
You get to adjust the asset's basis, taking into account, for example, improvements
and depreciation in the case of real property or transaction fees and previously
paid taxes in the case of stocks or mutual funds. Figuring your correct
basis is critical. Mess it up and you'll come up with a basis that's too low,
and that means a bigger tax bill than necessary.
loss -- No one ever wants to suffer damage to their property. When it does
happen, you might be able to at least get a bit of tax help from Uncle Sam. It
doesn't matter whether your loss is caused by a natural disaster, such as a hurricane,
earthquake or flood, or at the hands of a thief or vandal. They all count as casualty
losses as long as they're sudden, unexpected or unusual. By itemizing your
taxes, you might be able to write
off a portion of your damage amount on your taxes.