Looking to save more on your taxes this year? Who isn’t! There are several simple ways to lower your taxes that taxpayers often overlook. We’ve highlighted just a few tactics that you can utilize to save money on your taxes this year.
Donate to Charity
Make a donation to a qualifying charitable organization or donate clothes and household items to charity. When donating material items, you may only deduct the amount that exceeds the fair market value. If you contribute money to a charitable organization, be sure to keep bank records and documentation from the organization with the date and amount contributed.
Contribute to 401k
The taxes we owe are calculated based on our AGI, or adjusted gross income. Money contributed to a 401k or retirement account is a pre-taxed contribution, which means it lowers the amount that you are taxed, a.k.a. your AGI, therefore you’ll pay less in taxes.
Take the Earned-Income Tax Credit
The Earned Income Tax Credit (EITC) was created to lessen tax burdens for working individuals with low to moderate incomes. The EITC is a “refundable” credit that may give you a tax refund even if you had no tax withholding. You must file a tax return, as well as meet other certain criteria to claim this credit. To see if you qualify, check our EITC resource page. Also, be aware that with the passing of the PATH Act, individuals who claim the EITC will have their refund held until mid-February. Learn more about refund delays here.
Keep Track of Your Medical Expenses
Many health-related expenses are tax deductible when you itemize your deductions. You may deduct unreimbursed allowable medical and dental expenses that exceed more than 10 percent of your AGI. Be sure to keep a thorough record of these medical and dental records, including the medical care provider’s information and an itemized invoice of the care your received.
Buy a House
Mortgage interest payments are tax deductible, and your payments for the first few years after buying a house will mostly be your interest, therefore you can save a whole lot on taxes. Keeping your mortgage for a longer period of time can also lower your taxes as opposed to paying it off quicker. Plus, you can also deduct the money you pay in property taxes every year.
Save for College
Contributions to a 529 Plan or college savings account aren’t tax deductible, however that money can grow tax-free as long as the money is used for qualified expenses such as tuition, fees, books, and room and board by the designated beneficiary. Being exempt from federal taxes is a major tax advantage, and 529 Plans can make it easier for parents to save for their children’s future college expenses.
Use a Tax Preparer
Although filing online can be quick and convenient, tax preparers are trained to catch every deduction and credit that you’re eligible for. Their job is to help you pay less in taxes and they can also help you understand the often confusing tax code. For professional and friendly tax help, find your local Liberty Tax office and set up an appointment with a tax preparer today!