Did you know that the first $20,000 that is withdrawn from a 401(k) or IRA is exempt from New York State income tax? Wondering if you can deduct your Medicare costs on your taxes? The short answer is yes, but only if you meet certain criteria. We all want to lose less money to taxes. Here's how to hang onto the extra income you've worked hard for. Taxes are one of the few constants in life, but what happens when you change the way you do your return? People move or get divorced, tax preparers pass away. There is always the lure of do-it-yourself - the number of people using tax software to file, like Intuit's TurboTax, increases by 6 percent annually, according to the Internal Revenue Service. And then there is the reverse exodus of people who have decided their financial lives are too complicated, and they need to hire a professional. With so many changes, consistency takes a beating. If you are on the wrong end of it, you could end up drawing the dreaded attention of the IRS. Here are the items that can trip up taxpayers when they switch the way they do their taxes: Tax time can be stressful for many Americans. And it's not just gathering forms and filling out confusing paperwork that's a source of tension, but the gnawing feeling that you're missing something on this year's tax return. A report from the Congressional Research Service estimates Americans are eligible for $1.1 trillion in tax breaks last year, with over $195 billion alone devoted to the four most popular deductions; the biggies include "home mortgage interest, state and local taxes, charitable gifts and real estate taxes" according to CRS. But do the math, and that means over $900 billion in other tax breaks that were claimed last year. Millions of Americans face a challenge in meeting their budgets every month – not just financially, but also in their time budgets, says investment advisor Reid Abedeen. “Knowledge is power and time is often money, but what if you don’t have the time to empower yourself with knowledge? For many households, that often means losing out on thousands of dollars through tax deductions,” says Abedeen, a partner at Safeguard Investment Advisory Group, LLC (www.safeguardinvestment.com). “As a family man myself, I understand what it means to work hard to provide the best possible for my wife and children. Had I not worked in the financial sector for almost two decades, I might not have understood how to best troubleshoot my tax return, I sympathize.” It’s that time of year again – tax season. And there is one thing this year that’s going to complicate matters for everybody scrambling to meet that April 15 deadline. It’s called the Affordable Care Act. The ACA, commonly referred to as Obamacare, requires everybody to have health care - except for the millions who qualify for one of thirty exemptions. If you were not insured for some or all of 2014, and you don’t have an exemption, you could take a hit when you file your return for 2014. If you received a federal tax subsidy to help you buy a health plan through Covered California, the state’s health insurance exchange, you will need to reconcile your actual 2014 income with the income you estimated when you enrolled in the plan. It's tempting to simply take the IRS's standard deduction, but these often-overlooked write-offs really help on Tax Day. When many Americans file their individual tax returns this year, they will take the IRS's standard deduction, which is based on age, income and filing status, and changes from year to year. For the calendar year 2014, the standard deduction is $6,200 for singles and married people filing separate returns, and $12,400 for married couples filing jointly. But for those who either aren't eligible for the standard deduction or choose to itemize, every penny counts, and these frequently missed deductions can make a big difference when their tax bill is due. Don't let a knowledge gap prevent you from taking advantage of these money-saving tax breaks.
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