Now that the dreaded April 15th tax filing deadline is behind us, most of us are breathing sighs of relief, but more than a few of us may have missed some tax deductions we could have claimed if we had only known. Others of us will have claimed deductions that will ultimately be disallowed by the IRS.
Here is a short quiz to determine your deductibility quotient. Divide your correct answers (don’t peek) by the number of questions in the quiz, and check out how well you measure up at the end of the quiz.
1. You are a CPA and donate your time by preparing income tax returns for needy persons in your community. The time that you spend X a reasonable hourly rate would be deductible. Y or N
2. All legitimate casualty losses are deductible. Y or N
3. Even though you had to pay someone to prepare your income tax returns, that expense is all deductible. Y or N
4. You accept a new job that requires you to move, and you incur moving expenses as a result. When you add up your moving expenses, they amount to $4,500; but when you add them to your other itemized deductions, the total does not exceed $11,900 (you are married). No deduction? Y or N
5. Child support payments by a divorced dad are deductible. Y or N
6. The costs to send your children to private school are not deductible. Y or N
7. If you worked all of 2012 in England, the income that you earned is taxable in the U.S. Y or N
8. You have a love of feral cats and spent $2,500 in 2012 to feed them in your backyard. That expense is a deductible charitable expense if you have records. Y or N
9. If you received $19,000 from Social Security last year, and that was all the income you received, you are not required to file a tax return. Y or N
10. You paid the interest on your son’s college student loan. That interest expenses is your deduction. Y or N
11. Alimony payments you make to your ex-spouse are deductible. Y or N
12. Your mom died and left you the family farm. The original cost was $200,000, but your parents spent another $100,000 on improvements. Your mom had the farm appraised before she passed, and the value was $600,000. If you decide to sell the farm, what is your cost basis: $200,000, $300,000 or $600,000?
100% – tax genius
75-92% – tax expert
50-67% – tax tyro
Less than 50% – you need professional help
Got a financial planning question for Greg? You may email him at email@example.com.
Greg Roberts is a certified financial planner with 35 years of financial and real estate planning experience.