It is very possible to save money on income taxes. The following are eight different ways that an individual or family can save.
#1 Work At Home
Many wise individuals choose to work from home. Working at home has many benefits. When individuals work home, they’re able to save on taxes. When an individual can section off a portion of their home for their office, then they can report that as a deduction on their taxes. It is very important that the individual that decides to work at home has a work area that is separate from other rooms in their house.
#2 Cashing In On A New Home Loan
Every year individuals choose to refinance or buy a home. It’s important to deduct the original fee and discount points on that loan. When an individual does that, they can spread the deduction over the life of the refinance and they can deduct the remaining points from the first loan. Many people do not take advantage of this amazing tax rule, but it makes sense to use it. A quality CPA will know about this tax deduction, but it is good to do research either way.
#3 Make Sure To Take Advantage Of Any Write Offs
Each year and individual can offset their investment gains with losses. If the losses that individual has is more than what they gained, then they can deduct up to $3000 from their standard income. The rest that is left over can be carried forward to the next year. It is wise to look at the tax returns from the previous year and investigate the capital losses that were not used. In that way those returns can become more affordable. If an individual has to pay a certain amount to manage their safe deposit box, calls to their broker, or fees for tax preparation, then they can all be deducted.
#4 Take Advantage Of Self-Improvement
There are many things that health savvy individuals do to stay healthy. If an individual is sick, there are measures that must be taken to get well. Sometimes an individual’s hard work at taking care of themselves can be taken out of their taxes. Any medical costs that are qualified and go over 7.5% of the annual gross income are deductible (10% for most now). These things can include the following items: weight-loss programs that are prescribed by Dr., classes to stop smoking, acupuncture, massage therapy, chiropractic care, braces, eyeglasses, and occupational therapy. There is a complete list available on the IRS publication number 502.
#5 Take Advantage Of Sales Tax.
There is an option to write off either local income tax or sales tax. There are IRS tables that are available in publication 600 that an individual can use to find out their deduction. If a car, a plane, or boat was bought in the previous year, that can also be added to their IRS deduction.
#6 Make Sure To Include College
If there is a student in college, then it is a great tax benefit that can be deducted for tuition and fees. An individuals annual gross income cannot be over 135,000 if they are married and 65,000 if they are single. There is also a credit that can recuperate up to $1500 of tuition during individuals first two years of college. There’s also a Lifetime Learning Credit that gives up to $2000 for individuals in college.
#7 Make Sure To Include The Kids.
Many parents do make sure to include their kids when they are reporting their taxes, but even if an individual is divorced or a parent of an adopted child, they can still get the parenthood benefits. With a child tax credit, an individual can take the full credit for a child.
# 8 File Electronically
When an individual files for their taxes electronically, they can get their refund sooner and it will have less mistakes. There are are many high quality software programs that are available like TurboTax, or H&R Block. These usually cost a lot less than having to buy the software, and the price for doing e-filing is a lot less than doing paper filing as well. The IRS allows individuals to file their taxes for free online and it is only for those individuals that have an adjusted gross income of $50,000 or less.
It is great to know that a person can file their taxes and still have things be affordable. Some individuals choose to use a CPA for their tax preparation, but when it comes to income taxes, it is possible for a person to do things on their own as well. Whatever the case may be, it is important to make sure that a full investigation goes into these actions, because a person could save themselves thousands of dollars if their taxes are prepared in the correct manner.