Very few people relish the thought of preparing their taxes, but nobody enjoys the idea that they’re going to owe money when they come to their total. While deductions are personal and they aren’t a one-size-fits-all way to save money, there are 10 common tips that can help you save big when tax time comes. It doesn’t take an accounting degree to save on your taxes.
1. Work At Home?
If you have a home office or even a space you use solely for work, you might be able deduct a portion of your rent or mortgage payment on your self employment taxes. For now, you’ll need to figure out how much of your home you use and deduct a percentage of your total payment. In 2013, you’ll be able to use a standard $5 per square foot up to $1,500.
2. Make Charitable Donations
Getting rid of things that you don’t use and are probably cluttering up your garage anyway can help you find some needed deductions. Make sure you get a receipt from the organization you donate to at the time of the donation if any single item or group of items is worth more than $250.
3. Save for College
If you have children it’s never too early to start saving money for college, especially with tuition costs soaring higher each year. Depending on the state you’re in, you can deduct a certain amount of money put into a 529 savings plan for college funds.
4. Save for Retirement
Even if retirement is 30 years down the road you can still start saving. Contributing to 401(k) with your employer can be beneficial, as can a traditional IRA, which is tax deductible. Roth IRA’s aren’t tax deductible, but the money you put in and earned won’t be taxed next year.
5. Update Your Home
Solar electric systems and hot water heaters are good for the earth, but they’re also good for tax savings. The government allows you to deduct up to 30-percent of what you paid for these items up to $2,000.
6. Track Moving Costs
Many people don’t consider the cost of moving to be something they can deduct, but it is as long as you moved at least 50 miles from your previous home. You can deduct the cost of moving yourself and your belongings, as well as up to 24 cents per mile for your vehicle in 2013.
7. Keep Accurate Records
Keeping accurate records for all of your deductions including work-related travel, meals and even home office supplies will allow you to deduct as much as possible. It will also safeguard you in case of an audit.
8. Deduct State Sales Tax
If you bought a car or something expensive last year, you can deduct your state sales tax this year. This deduction could easily save you hundreds or even thousands of dollars – even in low-tax states.
9. Adjust Withholdings
If you can adjust your withholdings to receive more money in your hand you should consider doing it. Your tax return will be less, but you’ll have more time to invest earned money wisely so you won’t owe as much tax at the end of the year.
10. AMT Problems? Cut Your State Bill
If you’re always stuck paying the alternative minimum tax there may not be much you can do to reduce what you pay on the federal level. However, you can help reduce your state payments through charitable donations. Look for charities or organizations that offer 50-percent tax credit on donations. Donating stocks and mutual funds that earned money will allow you to deduce the fair market value of those securities at the time of the gift.