Posted on January 31, 2017 in Advice
5 Little-Known Ways to Save On Taxes
While many Americans may be disgruntled when it comes to tax season, we hope you can take advantage of the season and save on your taxes with these five strategies.
1. File Your Taxes On Time
Filing your taxes on or before the deadline will save you a big headache from the IRS. If you need more time or don’t have the funds to pay your entire tax bill, you must take the proper steps to alert the IRS. This will help you avoid penalties, interest or late fees. Here’s your options: file your taxes on time, request an extension or apply for a payment plan. We promise it’s better to take action instead of ignoring the situation and hoping it will just go away.
2. Deduct Job Hunting & Moving Expenses
Maybe you switched jobs or made a move for a job in the last year? You can deduct everything from Uber fares to the cost of printing resumes and business cards to moving across country (up to 23 cents per mile for all that driving). If you were looking for a job or moved over 50 miles for a job in the last year, you can deduct these expenses.
3. Write Off Side-Hustle Expenses
Did you drive for Uber or rent your apartment out on Airbnb in 2016? You may have extra tax considerations to sort through (and we wrote an article just for you!). If you purchased something or had to drive extra miles, you may be able to write these off. Doing so reduces your taxable income, meaning you would owe less to the government.
4. Deduct Student Loan Interest
While your student loan payments may be as big as your rent check (ugh!), you can at least deduct the interest you pay when filing your taxes. You can deduct up to $2,500 of the interest you pay on these loans throughout the year. In order to take advantage of this, be on the lookout for your 1098-E Student Loan Interest Statements. Typically, you can login to your student loan provider and find the tax form in your account. If not, contact them to see if they can provide an electronic copy for you to use when filing your taxes.
5. Make An IRA Contribution
You have until the tax-filing deadline, which is April 18 this year, to open an individual retirement account (IRA) and deduct that contribution on your 2016 tax return. That gives you the flexibility of claiming the credit on your return, filing early and using your refund to open the account. Since Traditional IRA contributions are considered pre-tax dollars, you get to reduce your taxable income which means a bigger return for you (or a lower tax bill). For this tax season, you can contribute up to $5,500 a year into an IRA (or $6,500 a year if you’re at least 50 years old).
Doing your taxes is never fun, but taking the time to do them correctly can save you big bucks. Do you have any other suggestions? Feel free to share in the comments below.