I know you're probably sick of hearing about taxes, but there's just a few more days and then bye-bye tax return. Unless, of course, you put your return on extension, and then it'sjust bye-bye 'till August.
Either way, a reprieve is near.
And the upside is, April 15 is a Friday, so you'll be done just in time for happy hour.
But in our pursuit to be your consummate advocate, we don't want you to forget anything. Let's go through a few more items that the pros say many people often overlook.
Bonuses on Last Year's Return
Don't forget any carryover items from last year's return. Check your prior-year capitallosses and your charitable contributions for these little golden nuggets.
Here's how they can help you now.
As a refresher, to calculate your net capital gain or loss, you must first net your lossesagainst your gains. Once you wipe out your gains, you can only take another $3,000 in losses.
Let's assume in 2003 you had $5,000 in gains and $9,000 in losses. Once you wiped out yourgains, you had $4,000 in losses left. But the rules say you can only deduct another $3,000.
What happened to the remaining $1,000? The balance wasn't lost, it was just carriedforward to 2004. Remember, Uncle Sam doesn't want you to get too much of a good thing in anygiven year.
The good news is that now you can treat that $1,000 loss as if you incurred it in this nextyear. So use it to offset any gains you had in 2004. And even if you don't have any gains thisyear, you can still use the carryover loss to offset your taxable income, up to $3,000.
If you had a very large capital loss carryover, and you couldn't use it all this year, you cankeep carrying it forward until it's gone or until you die.
The same goes for some of your charitable contributions -- the unused portions may be carriedforward as well. Why? Because some charitable contributions are limited by the amount of youradjusted gross income. That means, if the contribution exceeds a certain percentage of your AGI,you can't deduct it.
Odds are good you didn't even realize there were limitations on your contributions, mainlybecause most contributions are limited to 50% of you AGI. So if you earn $100,000, you can'tcontribute more than $50,000 in one year to, say, your church or the local boy scouts. And because not many people are willing to give away half of their salary, you don't hear much about thisrule.
But if you donate capital gains property, your donation can't exceed 20% of your AGI. So inour example, $20,000 would be your limit on capital gains contributions.
If you were feeling philanthropic in 2003 and contributed more than 20%, the unused portionof that donation would've been carried forward, which means you can deduct it now on your 2004 tax return.
Note that excess contributions can be carried forward only for the next five years. Any amountunused after that will be lost.
The tax code can get complicated, so check out the "Carryovers" section of
Publication 526 --Charitable Contributions.
Too Much Social Security
If you switched jobs during 2004, you might've had too much Social Security tax withheld fromyour paychecks. The 2004 cap was $5,449.80. The problem is, when you start with a new company, HRhas no idea how much Social Security tax was withheld from your previous job. As a result, your company juststarts withholding as if you were at zero. So be sure to check your W-2s. If you had more than$5,449.80 withheld, you can claim a credit for the overpaid amount on line 66 of your federal Form1040.
A Healthy Dose of Items
Here are a few more deductions that people frequently forget to include.
If you have a safe deposit box for your investments, you may be able to deduct the cost of thebox as a miscellaneous itemized deduction. If you use the box to store taxable income-producingstocks, bonds or investment-related papers and documents, then you can deduct the cost, says theIRS. If you use it to store personal items, like jewelry, or any tax-exempt securities, forget it.
Remember, only the miscellaneous itemized deductions that are greater than 2% of your adjustedgross income are deductible, so every little bit helps.
That's why you should also tally any cell-phone calls that pertain to your investments. Ifyou're constantly on the phone with your broker or adviser, be sure to go through your phone billsand include those calls as part of your miscellaneous itemized deductions, too.
Same goes for subscriptions to professional journals that are not reimbursed by your employer.
Do the same for your medical expenses. Those expenses need to exceed 7.5% of your AGI to bedeductible, but again, they can add up quickly. So total all your medical expenses that weren'treimbursed by your health insurance. Include fees for childbirth classes if they are part of yourobstetrical care, and the cost of any alcohol and drug treatment centers that you were in lastyear.
A Worthless Reminder
And finally, if you have shares of worthless securities or stock, and you have documentationto prove they're now nothing more than drawing paper for your kids, then be sure to claim thatloss on your tax return.
We wrote about this a few weeks ago, but as a refresher,
worthlesssecurities are treated as though they were sold on the last day of the tax year. So report them on
Schedule D -- Capital Gains and Losses
, either on line 1, if you held the shares for a yearor less, or line 8, if you held them longer. In columns (c) and (d), write "Worthless" instead offilling in a date sold or a sale price. Your loss will be the difference between what youoriginally paid for the shares and zero.
So, don't forget all these esoteric items that will help lower your tax bill. You'reentitled to deduct this stuff, so do it!
Hang in there! The end is near!