Volunteer Work

Can you deduct anything for the value of your time you spend helping charitable organizations? Unfortunately, the answer is no. You can however deduct any out of pocket costs and mileage of 14 cents per mile.

Commuting

In general, commuting costs are not tax deductible if you are a W2 employee. If you are self employed with your home being the principal place of business, then all of your travel relating to your business is deductible. If you are an employee with a job that is going to last one year or less and the job is outside of your metropolitan area, then commuting is deductible. Hauling tools, business calls in the car, or having a business meeting in the car will not convert commuting to deductible business travel.

Getting Social Security at Age 62

Age 62 is the earliest you qualify for social security in most cases. Should you take it at that time? I recommend that you do not if you are healthy and don't really need the additional funds. Why, because you will get a lot more if you wait. You will take a 25% cut from what you would get at your full retirement age which is age 66 for those born 1943-1954. If you can wait until age 70, you will get 8% more each year from age 66 to age 70 or a permanent increase of 32% more for life. Unfortunately, over 80% of those eligible at age 62 start taking social security benefits. Be in the other 20% if you can.

Medical Expenses Paid for Parents

Can you deduct any medical expenses you pay for your parents? The answer is yes if you provide over half their support for the year. Your parents do not have to be your dependent.

Moving Expenses for First Job

If your first job is at least 50 miles from your former home, you can deduct your moving expenses such as the costs of moving your household goods and your travel expenses. A recent college graduate can take advantage of this even without having to itemize since the deduction is an adjustment to income on page 1 of form 1040.

3.8% Net Investment Income Tax

This is a new tax for 2013 on the lesser of net investment income or the amount that adjusted gross income exceeds $250,000 for joint returns or $200,000 for single returns. For example, a couple filing jointly having net investment income of $100,000 and adjusted gross income of $300,000 would pay a tax of $1,900($300,000-$250,000 x .038) since the excess adjusted gross income of $50,000 is less than the net investment income of $100,000. The tax is computed on new form 8960. Net investment income includes taxable interest, ordinary dividends, royalties, net gains from the sales of stocks, securities and investment real estate, rental income, and passive income reduced by allocable deductions such as investment interest expense, brokerage fees, and rental expenses.

Required Minimum Distributions (RMDs)

When  taxpayers reach age 70 1/2, they are required to withdraw an RMD from their retirement plans except for Roth IRAs. The RMD is calculated by dividing the account balance at the end of the prior calendar year by the distribution period on the uniform lifetime table for the owner's age. For example, the distribution period for age 70 is 27.4. If the balance in the retirement account is $100,000, then the RMD is $3,650 ($100,000/27.4). Usually the broker will remind the taxpayer of the RMD amount and ask when you want to withdraw the amount. There is a 50% penalty on an RMD that is not timely withdrawn. The government is trying to encourage you to spend the money on your own retirement and not leave it to your children.