Tax-Saving Gems Included in New Tax Laws
Porter, Sylvia, THE JOURNAL RECORD
``I don't remember a year when an individual has not been able to find tax breaks that can be multiplied into giant savers, depending on the ingenuity of the individual,'' Eli J. Warach, chief consulting editor of Prentice Hall Professional Newsletters, said to me as we were preparing this series.
The following are savers you can use as guides when preparing your returns:
- Tax-deferred profits on home sales. The famous rollover where you sell one home and buy another. If the home you buy has a price tag as big as the one you sell - no current tax.
- The deduction for mortgage interest on your principal residence and second residence. You can, with a little ingenuity, get a variety of tax breaks.
- Tax free medical insurance and medical expenses paid by your employer. These continue to be giant dollar savers. Also, while there's a floor on the amount of unreimbursed medical expenses you can deduct, (7.5 percent of your adjusted gross income), there's no ceiling. If you meet the floor requirement, you can deduct all your medical/dental expenses to the point where you owe no taxes at all.
And consider paying your parents' medical bills, especially if they have relatively low taxes and relatively high medical costs. If your payments of their medical bills, plus other support you give them, add up to more than half their total support for the year, you may reap two tax advantages:
- You can deduct the medical expenses you pay.
- You may be able to claim them as dependents on your own tax return.
- Tax-sheltered Individual Retirement Accounts. Under the new rules, some IRAs are deductible while others (although not deductible) continue to grow tax-deferred.
- The deduction for charitable contributions. This may shock you, but the IRS says it is the sixth-biggest tax saver!
As illustrations: A man was allowed to deduct a gift to a church - even though the church employed his wife. …