The following guest post is from Trisha Wagner. Trisha is a freelance writer for DepositAccounts.com, where you can compare rates from dozens of banks in one place. She writes regularly on the topics of personal finance and saving money.
It happens every year when tax time rolls around people scramble to find ways to make filing their taxes easier and limit the damage to their wallets. What many people forget is by the time you file your taxes there isn’t anything you can do to change last years information, however you CAN take note and make changes now that will help you save money a year from now. The following basic tips can help you make the changes needed today and at the end of the upcoming year to take the bite out of your next tax bill.
- Deductions- Are you claiming all the deductions that you are entitled to? Many people mistakenly claim the standard deductions without fully investigating what they specifically may qualify for in their personal situation.
- Keep track of all business relates expenses and receipts- If applicable track all expenses related to a home business. Get into the habit of doing this systematically, weekly or monthly to ensure you don’t lose receipts or track of what you spent your money on as time goes by.
- Remember donations to charity- Ideally you should be donating to charities that have a personal meaning to you with the added bonus of being about to lower your taxable income at the end of the year. Remember to keep receipts for charitable donations.
- Take all applicable tax credits- Are you getting all the tax credits you are eligible for? If you have children under the age of 17 you may qualify for a $1,000 tax credit. There are other tax credits for various things such as adopting a child, buying your first home, earned income tax credits, saver’s tax credit, child and dependent care credit and education-related credits.
- Tax-free investments- If you are looking for a tax friendly investment you might consider tax-free municipal or government bonds or other similar investments. The returns are not as high as other investments but can be good for a high-income individual.
- Tax-free gifting- If you are have significant assets you may give up to $12,000 away tax-free for each individual you choose. Typically this works well for retirees who may want to gift money now instead of bequeathing it to someone in their estate.
- Review Tax Returns- Specifically Form 1040 for missed tax opportunities from the previous year. You should pay special attention to the Taxable Interest, Tax-Exempt Income, and Dividend Income lines. Your tax bracket has critical affects on the effective yield of your investments.
- Check your work twice- Taxpayers could save millions of dollars each year if they took the time to double-check their work. Error in tax preparation and on tax returns can be very costly for taxpayers.
It is important to remember that your financial situation, the economy and the tax laws change from year to year so it is important to keep up to date on tax information to ensure you are covering the basics each year and filing your taxes in a way that benefits you the most.