Have you ever had a friend tell you about their tax write-offs and thought, "Man, I've got to try that out"? Well, be cautious before you do. You see, there are many write-offs you may think are suitable for your situation, but if not, you can find yourself in trouble with the three most feared letters of the alphabet – the IRS. So take heed to the following info as all tax tips simply are not meant for you.
Home Office and Computer Deduction
Congratulations on your purchase of a new laptop! You may handle all household planning in your spare bedroom or sunroom-turned-office. Just because your entrepreneur friend was able to take the home office deduction, doesn't mean you can also. Your home office must be a section of your home used exclusively for business. This goes for your new computer as well.
Higher Education Credit
So you have decided that you want to change careers and have an interest in taking the real estate or insurance agent exam. These may qualify for the lifetime learning credit, but not the higher education credit.
To be eligible for this credit, an easy test is to see if the school or course is eligible for the student aid program run by the U.S. Department of Education. This course or program must also be helpful for the current profession you are in.
Donating Items to Local Charities
You may think that since it's a nonprofit organization that makes your donation eligible for a tax write-off to lower your taxable income. However, be cautious before adding that to your tax form. You see, eligibility is based on the organization being a 501(c)(3) organization. All nonprofits are not charitable organizations. Volunteer fire departments and religious organizations do qualify. However, civic associations and little league sports groups do not. Also, be careful of the gifts you donate. If you purchase $500 of raffle tickets for a worthy cause, unfortunately, this is not eligible for the write-off.
Donating a Bit Over the Yearly Allowance
So typically, you have a leeway of $250 to claim each year automatically for your charitable write-off. Don't think for a moment you can get over on the IRS with even a dollar. In fact, you should keep any and all records, even text message donations. You can prove this with your phone bill. This is handy if you are ever audited. Other than that, your payroll deduction, bank statement, or a written receipt from the organization will be sufficient.
Not all write-offs are eligible for every individual. There are some to help business owners, homeowners, and families. Be sure you are using the appropriate ones to keep yourself out of trouble. Using a tax preparation service, like Alexander & Associates CPA, is your safest bet.