Welcome to the season of taxes, where some of your hard earn money that is hopefully is returned to you in order to buy more stuff you probably don’t need, or add to your investments accounts. No judgement here. Whatever your plans are or will be once you get your tax return, you should first know a few things you can claim and do in order to maximize your full refund amount.
Why Pay When You Can Get It Done for Free?
Before you even think about paying someone for tax preparation services, see if you’re entitled to it for free. There are a few IRS-sponsored free tax preparation programs out there. I came across Volunteer Income Tax Assistance (VITA) last year, and it seems to be the most commonly used service in my area. These programs give eligible individuals free tax preparation assistance from trained volunteers if you fit the requirements below:
The VITA program is open to these groups:
- Individuals with incomes of $53,000 or less.
- People with disabilities.
- Elderly individuals.
- Those with limited English-speaking ability.
You Gave,You Should Receive
It is common knowledge that with receipts you can deduct the value of any cash or property donations to a legitimate charity. However, did you know volunteers can deduct 14 cents per mile traveled to and from charity work? Not to mention out-of-pocket expenses from that work, including supplies and required uniforms.
Trying to Find A Job
If you’ve moved 50 miles or more for a job, you may be able to deduct moving expenses. But if you’re actively seeking work, many other costs are deductible as well. Employment agency fees, resume preparation, business cards, travel (at 56.5 cents per mile), and other expenses all can be listed as a deductible. Keep in mind though, there are catches to this.
- It has to be for work in the same field, and
- It’s only for those who itemize.
You Paid to Learn. Now Get Some of That Back In Your Pocket
As your students loans begin to add up (hopefully you are paying them) you can feel some relief knowing it can lower your taxes. The American Opportunity Credit is the best way to lower taxes because it’s partially refundable, meaning you can theoretically get more money back than you paid in. You’ll get the credit for the full amount of the first $2,000 spent on qualifying college expenses and 25 percent of the next $2,000, so the max is $2,500. The American Opportunity Credit is only available for the first four years of college. Anything beyond that, look to the Lifetime Learning Credit. It’s up to $2,000 — 20 percent of the first $10,000 in qualifying expenses — and is available for as many years as you qualify. It also includes graduate classes and job training courses. Read about all the education credits and deductions here.
If you are self-employed and travel for business, then you should know that your travel expenses are deductible. If you just so happen to get hit with a baggage fee at the ticket counter last year, that to is deductible.
The Child and Dependent Care Credit helps cover 20-35% of whatever the cost of daycare may be (depending on income). What many people aren’t aware of is this also extends to the cost of summer day camps, adult dependent care and even housekeeping. Restrictions apply, but it’s worth looking into.
Keep This In Mind
A credit is worth a lot more than a deduction, because a credit reduces your taxes dollar for dollar, whereas a deduction only reduces the income you’re taxed on. For example, if you’re in the 25 percent tax bracket, a dollar of deduction reduces your tax by 25 cents. But a dollar of credit reduces your taxes by a full dollar.
Did you know: Dr. Horace Webster, was the first president of the Free Academy (known as now: City College) stated the following: “The experiment is to be tried, whether the children of the people, the children of the whole people, can be educated; and whether an institution of the highest grade, can be successfully controlled by the popular will, not by the privileged few.” Basically saying, college was FREE back then.
Source: MoneyTalks News.com