You collected all those confusing tax forms. You dumped your pile of papers on your tax preparer’s lap. You even signed your tax returns. You’re done, right? Not quite yet.
Now that the chaotic rush has come and gone, it’s time for you to make sure you didn’t inadvertently leave Uncle Sam a tip he didn’t deserve. Here are three things to review that might result in some money back.
Qualified Charitable Donations (QCD): Using your IRA as a charitable donation tool is a tax-smart strategy. After you reach age 70 ½, you can donate to charity directly from your IRA without owing any taxes on the distribution. Remember, your IRA balance has not yet been taxed and Uncle Sam is waiting in the wings to get a piece of the action. However, when you donate some of your IRA to a qualified charity, it’s tax-free!
Unfortunately, it’s common for IRA donations to end up being taxed anyway. How is this possible? Because the tax form that summarizes your IRA distributions – Form 1099-R – doesn’t automatically subtract out your donations. You have to manually subtract them. If you donated some of your IRA last year, review Box 4a and Box 4b on your federal Form 1040 to see if you actually got credit for making those IRA donations.
Homestead Property Tax Credit: Some homeowners qualify for a special Michigan income tax credit that effectively rebates back some of their property taxes. If your home’s taxable value is less than $154,400 and your total household income was below $67,300, you are eligible for the Michigan Homestead Property Tax Credit of up to $1,700. Your very first step is to check your property tax bill to see if the “taxable value” of your home is below the threshold. If it is, you can then move onto step two to see if your household income is low enough to receive this tax credit.
Tax Loss Carryovers: If you switched your tax preparation software or even hired a new tax preparer last year, be sure to check that your unused tax losses were successfully carried over to your 2023 tax return. Missing your tax loss “carryovers” is especially easy to do.
To ease your mind, review your 2022 federal tax return and check for a negative figure on Line 16 on the top of the second page of your Schedule D. If you showed a loss that’s larger than $3,000, you should pull out your 2023 federal tax return. See if that negative figure was carried over onto either Line 6 and/or Line 14 on this year’s Schedule D. If your tax loss carryovers are missing, an amended federal and state tax return just might be in your future!
