Some people live very frugal lives just to increase their disposable income for either debt payments or savings growth. While looking into your household costs will really help, there are other places that you can look into to help you lower your expenses.
In most cases, people fail to realize that they can reduce their taxes. You never really pay attention to them because you don’t see them anyway. When you get your paycheck, the taxes are already deducted. Although your employer will automatically remove your income taxes, that does not mean you cannot enjoy tax deductions. There are many ways for you to get some deductions from your income and other financial related aspects in your life. These can be filed as tax refunds that you can get from the IRS.
Suggested tasks this year that will lower your taxes
Although the deadline is not until April of 2014, there are some things that you can specifically do to increase your tax deductions before the end of this year. Here are some of them.
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Charitable donations. The holidays is a great way to give to those who are not as fortunate as you are. What you do not know is that anything that you give to charity can be a part of your tax deductions. You can even talk to your family to decide on foregoing your annual Christmas trip to give the money to charity instead. You can celebrate with your neighbors and friends at home. What you give to charity can be written off as tax credits. It will be more worthwhile because you know your sacrifice helped someone else have a great holiday.
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Put away more money into your retirement. Your retirement fund is taken from your income before taxes. So the more you put away, the more tax credits you will have. This is actually beneficial for your future too because you get to increase you money for retirement. It is a win-win situation.
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Know the pre-tax flexible spending program. This is a program that you can have with your employer and it allows you to spend a certain amount until the end of the year. These can all be filed as tax deductions. Examples of these are medical related devices, eyewear, etc.
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Get rid of losing stocks. If there are losing stocks in your portfolio, you can sell them off and file them as a loss on your tax returns. This will help clean up your portfolio and allow you to reinvest your money on something that is more profitable. This act can help you claim up to $3,000 on a yearly basis. So if you are only holding on to apparent losses, then letting them go will give you tax returns.
These are great end of the year activities that you can work on and get tax deductions at the same time. If you think that all of these are becoming complicated, you can use online tax calculators like the ones found on US.TheTaxCalculator.net or Calcxml.com. Utilize these tools to help you compute how much taxes you should be filing before the deadline next year.
Some qualified tax credits that you may have overlooked
A week ago, we published an article that listed 9 tax breaks that you should not overlook. Well here are a couple more that you may want to look into.
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Student loan interest payments from parents. If your parents are helping you pay your student loans, you can file this as a tax deduction because IRS will treat this as a gift from parent to child. Even if you are not a dependent, this is a claim that you can make. This tax credit can go as high as $2,500. The great thing about this is, you don’t have to itemize it. On the downside, your parents cannot claim this tax deduction for themselves.
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Dividends that you have reinvested. If there are any dividends that you have invested, this can benefit you in your taxes. While it is not really a tax credit, it can help reduce your tax returns. If your investments are automatically used to buy more stocks, it increases the taxable amount in your funds. If you do not properly mark the reinvested money as such, you will be taxed for it twice – once when you earn it and another when you buy shares with it.
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Travel expenses of military reserves. If you are from the military, you have to know that you are allowed to file your travel expenses as tax deductions – at least if you use it to go to meetings and drills. Of course, there are qualifications like you have to stay there overnight and the travel must be more than 100 miles from your home. This includes gas, parking and toll fees. This also includes your meals and lodging costs.
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Self employed Medicare premiums. If you run your own company after you qualify for Medicare, you can use your premiums as tax deductions – at least those contributed to Medicare Part B and Part D. You have to be careful though. This is not applicable to those who run a company on the side or who has a spouse that has a medical coverage for the whole family.
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State income taxes filed during spring. You can also include any income tax that you filed to your state. These can be deductible too.
There are more tax deductions that you may be qualified for and it is highly advised that you look over the IRS website to gain more information about it. There is no one list for these tax credits so you may want to do some extensive research.
