Maximize Your “Gift” Of A Tax Refund

Next to Christmas, getting a tax refund is probably one of the greatest gifts you can get all year. What’s more, you can influence just how great that gift will be by the number of deductions you include in your tax return.AdobeStock_57719094

And there are plenty of deductions to take advantage of, some common and some not so common. Here’s a mix of both to consider when preparing your return:

  • If you’re paying your child’s college tuition, you usually are eligible for education tax credits or deduction of interest on loans. Depending how much you’re shelling out for their education, you could realize a substantial savings.
  • Are you a single taxpayer caring for a parent? Then you may qualify for the more coveted head-of-household status if you paid more than half of the cost of maintaining that parent’s residence for the whole year. And if you pay more than half of the cost for that parent to live in a home for seniors or a rest home, you can also claim head of household.
  • You have until April 18 (the tax filing deadline) to open a traditional IRA for the previous tax year. If you do so, you can claim the credit on your return. By filing early, you can use your refund to open the account. Traditional IRA contributions reduce your taxable income.
  • You can deduct the fair market value for clothing and household items that you donate to charity. But make sure you ask for a receipt from the charitable organization you made the donation to. In addition, you may be able to deduct mileage and travel expenses associated directly with volunteering if you helped out your favorite charity.
  • State and local income taxes withheld from your wages are deductible, as well as any prior year’s state and local income taxes paid during the year. However, you need to itemize to take advantage of this deduction.
  • The cost of preparing a tax return qualifies as a deduction. So whether you hire an accountant or use tax preparation software to get the job done, you can write off that expense.
  • If you have un-reimbursed business expenses such as mileage or the cost of seminars or professional publications directly related to your employment, those are valid deductions if they are more than two percent of your adjusted gross income.

You can make life easier for yourself by keeping track of specific types of expenses throughout the year that would qualify as deductions. There is software available to help you do this, or if you use a tax preparation professional, they can provide you with an organizer that will help collect all the appropriate documentation.

Make note that the filing deadline to submit 2016 tax returns is Tuesday, April 18 of this year, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday. This would usually move the filing deadline to the following Monday, or April 17. But Emancipation Day – a legal holiday in the District of Columbia – will be observed on that Monday, which pushes the filing deadline to April 18. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.

More information about filing your taxes is available on the Internal Revenue Service website at https://www.irs.gov/filingAs a courtesy, you will be leaving Blog.Bank5Connect.com and going to another website. We have approved this site as a reliable partner, but you will no longer be under the security policy of Bank5Connect.com. Come back soon!.

 

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