The surprising fact is that the average taxpayer does not receive the maximum refund that they deserve. Generally, this is due to a lack of knowledge.
Often, the error is on the part of the taxpayer that decides to prepare their own tax returns, instead of consulting with a professional tax preparation service that has knowledge on deductions that the individual may have missed.
Certainly, you don’t have to wait until it is tax time to get those deductions – the time to start is now.
If you’re looking to save money on your yearly taxes, here are some hidden ways to do so.
Change the Way That You File Your Income Taxes
Are you married and filing jointly? Perhaps, you should reconsider the way that you file your taxes this year.
Most couples file their taxes jointly. However, tax professionals find that most couples that file separately receive larger refunds.
Unfortunately, filing separately can be a big headache for most couples. By working with a tax professional, the entire process can be streamlined and the taxpayer may receive a bigger refund from the separated filings.
Generally, this is due to the way that the adjusted gross or AGI income is calculated for the single filer.
Reduce Your Total Income
Are you earning too much income? In a higher tax bracket than a few years ago?
If that’s the case, you are paying more taxes on that extra income. One way to save money on your taxes is to lower your income.
You don’t have to quit your current job for a lower paying job. Instead, start adding more to your retirement plan.
The money that is contributed toward your retirement fund is not counted as income. Don’t wait until the next tax season – start contributing more now.
Take Advantage of The Earned Income Credit
Surprisingly, many tax payers are not taking advantage of their earned income credit.
The earned income credit is for taxpayers that earn less and are in the moderate to lower income bracket. If you are in that pay range, it’s time for you to take advantage of it.
This tax credit lowers the amount of taxes that you pay and puts extra cash in your pocket. Check with a tax accountant or tax preparation service to determine if you qualify for the earned income credit.
Start A Business
Perhaps, you’ve always wanted to start your own business. Now, is the time to start thinking about starting a part-time or a full-time business.
The fact is that the business owner has much more control over the taxes that they pay. In addition, there are many more expense deductions that the entrepreneur may take on, thus lowering the overall tax.
New Job Expenses
Did you start a new job? Did you know that you could count this as a tax deduction if the new job required you to move to a new location?
This is one of those hidden tax breaks that very few people take. If the new job was more than 50 miles away, it’s eligible for a major tax break.
Count both the cost of moving as well as the cost of gas mileage racked up by your vehicle for the move.
Start Saving for College Tuition
Another way to save money on your taxes is to start a college fund for your kids. The fact is that only a small percentage of parents actually cut costs and start a college fund for their kids.
More parents would start a college fund earlier if they knew that this one step would help them receive a major tax benefit. This is because the money placed into the college fund is not taxable.
Go Green This Year
Both the population and the government are very concerned about wasting energy. Energy is a valuable resource that we must learn to conserve.
Therefore, the government has implemented plans to make it possible for the taxpayer to receive a tax break if they install alternative energy sources, like a solar energy system for their home.
Consult with a tax professional to determine ways that you could tap into this extra tax benefit.