There are still things you can do to improve your tax situation for this year. Here are 5 of the more common things you can consider:
- Contributing more money to your retirement plan(s) can provide tax benefits.
Contributing to a 401(k) or other employer retirement plan reduces your current taxable income. This year you can contribute as much as $13,000 to your 401(k) and $3,000 to your Roth or Traditional IRA (The Roth IRA doesn’t lower your current tax liability, but it does eliminate altogether your tax burden when you pull the money out at retirement!). [You can contribute even more if you’re over 50]
- Take advantage of student tax breaks.
If you or a child is attending college and meet the income qualifications, you can take a tuition deduction of as much as $4,000 for yourself or a dependent child ($1,000 more than last year) or you can take the Lifetime Learning or Hope tax credit. IRS Publication 970 offers good information about Higher Education Tax Benefits.
- Consider accelerating payments that can produce tax deductions.
If you write a January mortgage check or check for property taxes (or some other payment you can deduct) on or before December 31st, you can claim the interest or tax deduction in the year prior.
- Non-cash charitable contributions.
Have clothes that don’t fit? A couch that’s been replaced? Baseball cards? Items that no longer hold “tangible” value to you would be of value to someone else and are also able to be itemized (must itemize on your taxes to receive the tax benefit). Make sure you get a receipt.
- Modify the number of exemptions you claim.
The actual numbers I’ve seen vary, but in each case, it is suggested that ½ to ¾ of the people filing taxes each year receive a refund (an average of $1,000+ each).
Source: Iowa State Extension – Family and Consumer Sciences