Other tips for handling your taxes:
What if you had a baby last year?
-- First, add Baby to your exemptions.
-- The child tax credit available to many parents is now as much as $600. It starts phasing out for those with income over $110,000 for married joint filers, $55,000 for marrieds filing separately and $75,000 for singles.
-- If your income falls below those limits, fill out a new W-4 withholding form for your employers. The child credit is now factored in, and filling out a new form will immediately mean more in your paycheck.
A caution for mutual fund owners.
-- Even mutual funds that lost money may have triggered capital gains through sales during the year. Look carefully at Lines 2a, b, c and d of your funds' 1099-DIVs.
Deductions and 1 tax credit you don't want to overlook if you bought a house in 2001.
-- Points, the upfront amount you may have paid to obtain the mortgage on your principal residence, are deductible. Points masquerading as loan origination fees, maximum loan charges, loan discount and discount points are also deductible. (Points paid on the loan secured by a second home cannot be deducted in the year of purchase but must be deducted over the life of the loan.)
-- Unbelievable as it may seem, even points that were paid by the seller are deductible by you, the buyer.
-- If you haven't deducted all the points you paid to secure the mortgage on your old house, you may be able to deduct the remainder in the year you sold it.
One perennial homeowner deduction plus one caution and two reminders.
-- Property taxes are deductible for filers who itemize. (But specific fees, such as for trash collection, aren't deductible even if they appear on your real estate tax bill. Nor are homeowner association assessments deductible.)
-- Don't deduct any mortgage-payment late fees in addition to the mortgage interest reported on your lender's 1098 form. Penalties and late fees should already be included in the total interest paid.
-- Remember, too, that FHA mortgage insurance premiums and private mortgage insurance aren't deductible.
A permanent reminder for homeowners.
-- Retain all receipts and paperwork pertaining to major additions and improvements to your house (and all previous houses, if you still have those receipts). Under current law, if you sell your home, $250,000 of profit is exempt from tax for single taxpayers, $500,000 for married couples filing jointly. Money paid for improvements will raise the cost basis of your house, and may keep your profit in the tax-free zone. A useful Record of Home Improvements table appears as Table 4 of IRS Publication 530, "Tax Information for First-Time Homeowners."
Tips for the self-employed.
-- The standard mileage reimbursement for business miles is 34.5 cents per mile for 2001.
-- You can deduct 60 percent of what you paid for health insurance for self and family.
Don't report that refund! (Maybe.)
-- Report your state or local tax refund from 2000 as income in 2001 only if you itemized deductions in 2000. If you took the standard deduction (see Form 1040, Line 36, of your 2000 return), do not report the refund.
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