Understanding and taking advantage of the full scale of tax deductions available in the state of Texas can provide taxpayers with maximum annual tax savings. Many deductions, such as charitable contributions and student loan interest, are well-known. But the tax burden for many Texans is overstated each year due to improper calculation of eligible deductions and credits.
Although many major deductions are standardized across the nation, many states offer additional tax saving based upon local environment and needs. Taking advantage of lesser-known opportunities can provide additional savings and reduce tax burden. There is no personal income tax in Texas, but other opportunities exist in franchise management, economic development, personal business expense and the environment.
Depending upon age, income and employer plan, traditional Individualized Retirement Account (IRA) contributions may be deductible, as are the penalties related to early withdrawal. Loan interest on home equity, self-employed health insurance premiums and social security taxes, as well as alimony payments may also qualify. And for those who serve in the military reserve, travel expenses for duty trips in excess of 100 miles from home are deductible.
Although personal income tax is not in effect in Texas, expenses related to job function are an overlooked deduction opportunity. These can include travel, job skill training or improvement, clothing, professional print subscriptions, and the cost of union dues. Even the money spent in a job search can be deducted provided the search entails a position in your current line of work. Job search deductions include travel, phone calls, postage and the cost of a new resume, even if the job is not obtained.
Financial transactions and safeguards are also eligible, including fees paid for investment services, the rental of a safe deposit box, investment periodical subscriptions, and even fees related to tax preparation. These include filing fees, tax calculation software purchase and tax-related periodicals.
Texas does not currently have an official program to reduce individual taxes on renewable energy equipment. There are, however, several available deductions and exemptions available if qualified.
For example, manufacturers, seller or installer of devices to collect or utilize solar energy may take advantage of a franchise tax exemption, as well as deduction from the state’s franchise tax for the use of renewable energy sources. There are several avenues available for this reduction. The first is designation of tax-free status for the ground serving as the installation site for renewable energy sources, including wind, solar or biomass generation.
In addition, a business can deduct 10 percent of the total cost of such a system from stated income, or select deduction of the total cost from any taxable capital.
Economic Development Benefits
Since January 1, 2000, eligible Texas corporations may take up to three economic development credits for costs and expenses related to specific job creation, research, business development, or capital expenditures or investments.
The benefits of eligible tax reduction are many and can be specific to business location and environment. To determine the best deduction scenario, a qualified certified public accountant should be contacted.
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