The majority of people file their taxes in a hurry and don’t take the deductions they deserve. The advice in this article is from a tax expert who has spent countless hours sitting down with clients at the end of the year sifting through receipts, answering questions, and making sure that nothing is overlooked. These are the simple steps they teach clients who are interested in organizing early, and saving more money.
Take a look at all the deductions you qualify for
The deductions that apply to you or your family is a great place to begin. Folks often forget simple items like student loan interest, childcare expenses or some medical costs. A few minutes in a quiet corner with a list of what applies to your family can help you find savings that you might have missed.
Boost your retirement savings
Before the end of the year, try to put as much as you can into your 401(k), IRA or other employer-sponsored retirement account. The more you contribute, the more you save for the future and the less of your money gets taxed right now. Even small contributions can create some extra tax relief when tax time comes around.
Track charitable donations to claim on taxes
Donations you made this year like cash, clothing, or anything you dropped in a charity bin could reduce your taxes. Hold onto the receipts and make a basic list of what you donated and when. It will make filing easier and help you remember everything.
Deduct your medical expenses for the year
If you had any surgeries, prescriptions, therapy or other medical expenses, collect those documents. Some of these costs are deductible if they exceed a certain percentage of your income. Many people forget about costs like dental work or glasses that can be included.
Consider income-splitting strategies if applicable
In some situations, shifting income to someone else in the household (paying your spouse or teen for work in your family business, for example) can lower your overall tax bill. It’s not an option for everyone, but if it’s available to you, it’s worth considering.
Review and claim education-related credits or deductions
Did you, your spouse, or your children take any classes this year? If so, you may be eligible for credits such as the American Opportunity Credit or Lifetime Learning Credit. Tuition, books, and certain other school fees may also be used to lower your tax bill, so it pays to examine every receipt.
Deduct investment-related expenses and losses
Quickly make a list of any investment fees you paid during the year. Review the overall performance of your investments. In some situations non-deductible fees can become eligible for deduction. Keep track of your losses to use when you offset your gains.
Claim work-from-home or business-related expenses
Did you work remotely for part of the year or make some extra money on the side? Some of your everyday expenses could be tax deductions. Internet service, a few office supplies or even part of your rent or electricity bill may be eligible. It’s a bit of detective work as the rules are strict but if you take your time you can claim what you’re owed.
Use tax software or a professional accountant
Tax software is great, but a tax pro can dig deeper. If your finances shifted this year, a brief visit to a pro may ease your stress and even save you money.
Review recent tax law changes to maximize benefits
Tax laws change more frequently than many people realize. One minor update this year (a new credit or an increased deduction limit) may be a “winner” for you. A few minutes spent looking over these changes can pay off.
Make end-of-year payments that could qualify for deductions (mortgage, tuition, etc.)
Some prepayments may be deductible, if made by December 31. You may receive a deduction for mortgage interest payments or tuition bills if you pay them this year instead of deferring to next year.
Organize receipts and documentation for accurate filing
Be just a bit organized to save hours down the road. Create a little folder (physical or electronic) and stuff every tax document you receive into it. You’ll thank yourself later when it’s time to file and everything is where you expect it to be.
