Just in time for tax day, here are 10 ways to avoid sending more of your money to the IRS.
10) Boost your retirement savings: Every dollar you put in your 401K or traditional IRA saves you money on your taxes. The money you put away pre-tax comes right off of your taxable income.
9) Give back: Instead of having a yard sale, donate the things in your house that you don’t use to charity. If you itemize your taxes, this can lead to substantial deductions. Just make sure to keep a written record of your donations, and value them realistically. In addition, expenses that you incur while doing charity work may be deductible.
8) Utilize all of your employee benefits. Does your employer offer a health care flex plan? How about a child care reimbursement account? If so, take advantage of these plans! Paying these expenses with pre-tax dollars is the way to go. However, many of these plans are the use-it-or-lose-it type, so be sure to estimate your annual expenses accurately when you sign up for them.
7) Buy a house: For many people, the difference between itemizing their taxes and taking the standard deduction is the interest they pay on a mortgage. That deduction can lead to a big tax savings. However, make sure that you include all the costs of owning a home when you calculate what it costs to rent vs. buy. Maintenance on a home always seems to cost more than what you think it should.
6) Buy a vacation home: The interest on your vacation home debt is also tax deductible. Be careful, the limit for deductions in 2014 was the interest on up to $1.1 million in debt. That includes the value of your primary home and your vacation home.
5) Borrow money for school: If you don’t have to, lucky you. For most of us, borrowing money for college is the only way to pay for it. Remember to deduct the interest on your student loan payments if you are under the income threshold of $80,000 if you are single or $160,000 if you are married.
4) Start a business: Entrepreneurs have more options when it comes to paying taxes. They still have to pay them, just like everyone else, but many expenses related to starting and running a business are deductible. In addition, there are better options for retirement savings if you are self-employed.
3) Sell your loser stocks: On great way to pay less taxes is by tax-loss harvesting. This means selling stocks that are held outside of retirement accounts that have declined in value during the year. Not only can you offset capital gains that have accrued during the year, but you can deduct up to $3000 of capital losses against ordinary income.
2) Add up all of your medical expenses: Medical expenses go up every year, and they usually take up a higher percentage of our income as we age. If your medical and dental expenses were more than 10% of your AGI in 2014, they are probably deductible.
1) See a tax professional. Many times, a good CPA or Financial Planner can pay for themselves and then some throughout the year by helping you avoid costly mistakes. The tax code is extremely complicated, so having a professional working on your behalf is never a bad idea.
And as always, listen to our radio show, as we will always fill you in on how to protect yourself, and it is free every Saturday morning at 10AM! Jacksonville's 100.3 FM and 600 AM, "The Answer". www.wbobradio.com