If one of your New Year’s Resolutions is to become more financially savvy, you’re going to want to take advantage of one or more of these 12 tax-saving tips. Doing so can add up to hundreds, and even thousands of additional dollars in your pocket every year.
Take a look …
1.) File early
Why? The sooner you file, the sooner you’ll receive a tax refund if you’re entitled to one. If you haven’t started organizing your tax paperwork ... receipts, records, 1040 forms, or whatever forms you need ... start now. You could do worse than start here. (Which tax form should you use? Check out this easy reference from Forbes.)
2.) Job Hunting?
Anyone who has been searching for new employment opportunities should know that job-hunting expenses are tax-deductible. This includes travel (air, gas), food, business accouterments, such as portfolios and briefcases, as well as lodging, and the use of placement professionals.
3.) Self Employment
So many people work from home, but many don’t realize part of their monthly home expenses are deductible. Utility bills, some insurance premiums, and home maintenance costs are just a few examples of expenses you can - in part - claim.
4.) Major Life Changes
New baby? Marriage? Divorce? Job change? Make sure your tax form is up-to-date, and deductions are itemized. If you have children, you can receive a deduction for child-care costs, plus a child tax credit. Alimony costs are also deductible. If you are a single parent, you occupy a special tax bracket. Here is a quick handy reference for single parents.
5.) Education Saving Plans
Parents often need a college savings plan and 529s and plans for their children. These are offered by certain states to allow the money you contribute to grow tax-free.
See if you qualify for the EITC or earned income tax credit. If you earn $50,000 or less/year, you may be entitled to a credit as high as $6,000. An easy table is available online for your reference.
Contribute more to your retirement plan - (401(k) or IRA - via your paycheck. You’ll not only save more money but lower your tax burden. Money put into these plans is deductible within limits.
8.) Matching Pledges
Many employers match a percentage of their employee’s retirement contributions. If yours does, wonderful! Take FULL advantage. Not only will you win by obtaining the match itself, but you’ll also reap the benefits of this account’s tax-deferred growth status.
9.) Charitable Contributions
Yes, we know that checks and other donations sent to charities are tax-deductible, but so are checks made out to other people you care about. Individuals can receive $13,000 in tax-free gifts, and children can receive $26,000 ($13,000 from each parent) tax free.
Maybe this isn’t your year for sending money off to charities or individuals, so you do your giving via your time. Perhaps you contribute to bake sales, clothes drives, and the like. Keep track of whatever time and money you spend on such tasks (ingredients, stamps, phone calls, etc) because these efforts and expenditures are also tax-deductible.
With new insulation, windows, or qualifying heating/cooling systems and you’ll receive a tax credit. Some alternative energies, like solar panels, qualify as well.
12.) Medical Expenses Tracking
Create a folder for you and your family’s medical expenses and receipts. Statements from doctor’s appointments, hospitalizations, and medications, along with receipts from alternative therapies (acupuncture) and first-aid supplies (tax-deductible) should be filed. Not sure what to include? Go to irs.gov for a full list.
Taxes do not have to be such a headache with all the tools and information available here and online. Do you have a tax or other specific personal finance questions you need further help with?