5 Essential Money-Saving Tips for Your Tax Returns
Monday, January 23rd, marked the official start of tax season. It was the first day tax returns could be filed. For millions of Americans, this can be a stressful time because A) either they’re unsure of how to fill out the often complicated forms or B) they have a hunch they’ll be writing Uncle Sam a big check when that tax bill comes.
For other people, this could be a nice windfall. A 2016 report by Turbo Tax states that 45 million taxpayers claimed $1.2 trillion in itemized deductions on their 1040s, while those who just claimed the standard deductions accounted for about $747 billion.1
A standard deduction is basically whether you file as head of household, married filing jointly, married filing separately and single. You can also claim extra standard deductions for age (65 or older) and blindness.2
If you qualify for a piece of that 1.2 trillion-deduction pie, it can make a big difference on how much you end up owing. So before you sit down to do your taxes or hand them over to your accountant cousin, be sure to review these deductions!
1.) Dependents (Other than Children)
Depending on a few qualifying factors, the following people can be claimed as dependents: parents, grandparents, stepchildren, in laws, foster children, cousins and boyfriends or girlfriends.3
2.) Moving for a New Job
If you relocated more than 50 miles from your home because of work, you can deduct this from your taxes. You are allowed to deduct “reasonable moving expenses,” but not food. This mean you are 100% responsible for all of those road-trip diner meals.4
3.) Charitable Contributions
Did you clean out your closet last year and donate shoes, electronics and other items? If so, don’t forget to deduct it! Every bit counts – even the ingredients in a soup or dessert you made for a shelter or other such charitable organizations.5
4.) Mortgage Interest Payments
Homeowners get to write off their interest – so if you paid interest on a mortgage in 2016, you can claim that as a deduction.6
5.) Energy Efficient Improvements
This is your last chance to cash in on being Earth-friendly, as 2016 is the cutoff for claiming energy-saving home improvements on your returns. The max amount you can claim – in total, over the course of all your returns, is $500 based on 10 percent of the purchase price.7
This is just the tip of the iceberg when it comes to itemized deductions. For example, if you work from home and use a room exclusively for your work, you can take a home office deduction for that “work” room.
You still have a few months to submit your taxes, so be sure to take your time to understand all of the itemized deductions available to you. While it might seem like a chore now, you will definitely be glad you got it right when Uncle Sam sends you his bill.
1https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Deductions-and-Credits/The-10-Most-Overlooked-Tax-Deductions/INF12062.html
2https://www.irs.com/articles/understanding-standard-deduction
3https://www.irs.gov/publications/p17/ch03.html#en_US_2016_publink1000170962
4https://www.irs.gov/taxtopics/tc455.html
5ttps://turbotax.intuit.com/tax-tools/tax-tips/Tax-Deductions-and-Credits/The-10-Most-Overlooked-Tax-Deductions/INF12062.html
6https://www.irs.gov/publications/p936/ar02.html
7http://www.kiplinger.com/slideshow/taxes/T054-S001-overlooked-tax-deductions/index.html