Making the Most of Tax Time

This is not a favorite time of year for most of us, because wading through all the paperwork needed to prepare our taxes can be a headache. But if you have to gather up all the information anyway, you might as well use it as an opportunity to improve your financial situation. Here are some ideas:

• Mortgage Interest Deduction - Look at the year-end summary report you received from your mortgage company and see what you still owe on your house and your current interest rate. The national average for a 30 year fixed rate is 4.96%, and some banks here in Cincinnati are offering even lower rates. If you have a mortgage over 6% you should seriously consider refinancing and locking in a lower rate while they are still at historical lows.

• Real Estate Tax Deduction - Chris Carleton mentioned it in her March 9th blog, Taking Advantage of a Decline in Your Home’s Value, but it’s worth mentioning again. Even if you have your home paid off, real estate taxes will continue to be a major housing expense for you, so having your house reassessed after the housing downturn might be worth it. You won’t be able to make the March 31st deadline for this year, but we can help you if you’d like to file for a reduction for next year.

• Interest and Dividend Income - Do you receive 1099-INTs from a variety of banks and brokerage companies? Do you have brokerage accounts that you set up with the intention of doing some investing on your own, but haven’t taken the time? You should hold three to six months of living expenses in very liquid investments in case of emergencies, but more than that and you are missing the opportunity to maximize your income. Consider consolidating these accounts to simplify your life and maximize your interest. You’ll thank yourself next year.

• Charitable Contributions – Do you give money to a wide variety of charities each year? Look at your average giving over a period of years, and consider setting up a donor-advised fund for future gifts. The large deduction in the year you set up the fund will have a much greater tax impact; and you can involve your children or grandchildren in your gifting decisions to pass along charitable family values. In Cincinnati, we have great resources such as the Greater Cincinnati Foundation, where you can establish a donor-advised fund with a $25,000 contribution, and the West Chester Community Foundation.

• College Planning with a Deduction – It felt like it took forever to pay off our college loans when we were first married, so my husband and I want to help our grandson with his college expenses. By setting up a 529 account, we can help him and get a deduction up to $2,000 on our Ohio income tax return. If you want to help a young person with college, this is a great way to do it.

We can’t make the work of filing your taxes go away, but we can help implement one of these ideas. If you would like to know more, please give one of us a call.

Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/