Increase Your Tax Savings With These Tips
If you expect to cut your tax bill and save some savings, be sure to act quickly.
Taxpayers have until April 17 to send their statements and pay Uncle Sam. The IRS predicts that it will receive more than 155 million benefits this year. More than 7 out of 10 taxpayers are expected to collect refunds this year, according to the agency.
If you are suspending the submission of your return, here is an incentive to get going: you only have a few weeks to implement these tax saving tactics.”Strategies to reduce your tax bill for 2017 revolve around claiming all the deductions and tax credits you legally deserve,” said certified public accountant Debbie J. Freeman, director of financial planning at Peak Financial Advisors in Denver.
“Focus your attention on three separate elements: deductions for adjusted gross income, tax credits and itemized deductions,” he said.
Here are some savings opportunities that deserve another look, according to Freeman.
Over the line
These breaks are better because they are accessible to everyone, regardless of whether they are detailed or not.
Health Savings Account: If eligible, make a tax deductible contribution to your HSA before April 17th. HSAs have a triple tax benefit: contributions are tax deductible or pre-tax, savings increase without taxes and users can make tax-free withdrawals for qualified medical costs. You can save up to $ 6,750 on this account if your family is covered by a high deductible health plan. Contribution limits for personal-only coverage are limited to $ 3,400.
IRA: You can save up to $ 5,500 per year in your IRA ($ 6,500 if you have more than 50) and get a deduction, as long as you meet certain income requirements. Single respondents with a modified adjusted gross income of up to $ 62,000 ($ 99,000 for joint filing) can deduct up to the amount of their contribution limit. Beyond those thresholds, taxpayers with a MAGI of up to $ 72,000 if they are single ($ 119,000 if married) can collect a partial deduction.
IRA SEP: Save up to $ 54,000 in your SEP IRA if you have your own business. Keep in mind that the amount you can deduct for your own SEP IRA contribution will vary based on your net earnings. You have until April 17 and October 15 if you present an extension, to make a contribution and count it for 2017.
Insurance premiums: if you are an entrepreneur, you may be eligible to deduct premiums for dental and health insurance coverage. This is known as the deduction of health insurance on your own.
Student Loan Deduction: If you paid at least $ 600 in interest for a qualified student loan, you may be eligible to deduct up to $ 2,500. Keep in mind that this break is subject to limits: it begins to be phased out for single taxpayers with modified adjusted gross income of more than $ 65,000 ($ 135,000 for married filing a joint return).
Moving expenses: If you moved, you may be able to deduct these expenses, as long as you pass a three-part test.
- Your movement must be related to the beginning of the work.
- Your new workplace should be at least 50 miles away from your previous home compared to the distance between your old job and your previous home.
- Finally, if you are an employee, you must work full time for at least 39 weeks during the first 12 months after your arrival. Individuals who are self-employed must meet this test of time, and must work full-time for at least 78 weeks during the first 24 months after arriving at their new location.
Costs of child and dependent care: This break is designed to help parents who work with child care costs. This credit can be worth up to $ 1,050 for a child under 13 years old or $ 2,100 for two children under 13 years old. You will need your provider’s tax identification number and other information in order to obtain this credit.
Saver Credit: If you hid up to $ 2,000 in an IRA or a 401 (k), you can receive a credit of up to 50 percent of your contribution. Joint respondents with adjusted gross income of more than $ 62,000 can not take this break, nor can individual respondents whose AGI exceeds $ 31,000. You have until April 17 to make a contribution and tell it for 2017.
Education Credits: If you have a child in college, consider the US Opportunity Tax Credit, which offers a maximum annual credit of $ 2,500 per eligible student. There is also a Lifetime Learning Credit of up to $ 2,000 per tax return. There is also the deduction for qualified tuition costs, which Congress revived for 2017: you may be able to deduct fees, books and supplies for your studies up to $ 4,000.
Deductions by article
Charity: probably remember to make a large donation of cash or appreciated stock, but do not forget to count your items other than cash. Goodwill and the Salvation Army offer guides that will help you assess the donated assets. Donors also tend to overlook the miles they drove to serve charities: when calculating your deduction, consider the rate of 14 cents per mile.
Doctor: collect your receipts, including information about long-term care insurance premiums paid. You may be able to deduct medical costs to the extent that they exceed 7.5 percent of your adjusted gross income. “Do not forget about the medical miles handled,” Freeman said. “You will need documentation of that.”
New Home: You already know that mortgage and mortgage interest premiums are deductible. If you bought a house in 2017, bring your closing statements when you meet with your accountant, Freeman said. You may be able to deduct mortgage points or prepaid interest, in addition to origination fees.
Last call for miscellaneous itemized deductions: this is the last year in which you can deduct items such as tax preparation fees, investment management fees and expenses of unreimbursed employees.
The Tax and Employment Reduction Act annulled these tax exemptions, beginning in 2018. “If you think you can reach the limit to detail, take everything you are legally allowed to take because you are going to leave,” Freeman said.