Saving Money This Tax Season

Jan 23, 2018 by

I’m publishing a guest post today, for which Money Counselor has received compensation, on the topic of cutting your tax bill. Please offer your feedback in the comments!

The holidays-to-tax-season transition can be harsh but, with a bit of preparation and even more know-how, you can ease the pain and save money at the same time. In fact, if you know the ins and outs of the tax laws and make sure to file on time, you can even save money. It’s possible to look forward to April! Read on for tips on how to save money this tax season.

Don’t Forget the Kiddos

This might sound terrible, but you want to take full advantage of your children when it comes to tax season. The way the tax code is written provides parents benefits that include credits for child care costs, the child tax credit offered for each child, and the ability to count more dependents in your household. Make sure you are aware of the many child-related tax benefits or risk leaving money on the table.

Be More Eco-Efficient and Save Money, Too

The federal government encourages taxpayers to certain things to get tax breaks, and one of those areas is in energy efficiency. They give taxpayers breaks if they make their homes more efficient in this arena, by adding insulation, new doors or windows, and qualified heating and cooling systems. Somewhat new and “alternative” energy sources such as solar panels are also eligible for tax credits.

Don’t Forget the Charitable Causes

There’s no guilt needed over this one. You did a good thing by donating to a charitable cause so don’t leave the tax money associated with this on the table. Keep your receipts and/or reach out to the organization before tax time and have them mail one to you. Keep in mind, though, that charitable contributions aren’t the only kind of tax-deductible gift. With a technique called “gift splitting”, each parent can join up to give each child a large tax-free gift.

Find Out if You Qualify for the Earned Income Tax Credit

This EITC is a refundable tax credit that some low to moderate-income working individuals and couples qualify for, especially those with children. The amount depends on income level and number of children. It’s well worth your while to consider this if you think you could qualify.

Leverage Your Business

Business owners can choose to keep their money in the company as opposed to putting it down as income while also counting some costs as expenses. The tax laws surrounding this are nuanced, however, so if you’re a business owner, it’s best to hire a tax professional to help navigate how this works. They can also provide any other help with tax problems that you need.

Open or Keep Contributing to Your 529

Have you seen the cost of college tuition these days? It could and should send shivers down your spine. As this article notes, “According to the College Board, the average cost of tuition and fees for the 2017-2018 school year was $34,740 at private colleges, $9,970 for state residents at public colleges, and $25,620 for out-of-state residents attending public universities.” If you’re not taking advantage of the 529 college savings accounts for your children, you’re missing out on the opportunity to let your money grow tax-free. And as long as the money is ultimately used on tuition, you’ll be investing after-tax money.

Refinance Your Mortgage Now If Want to Take Cash Out

With laws constantly being passed that will affect your taxes, it’s best to either hire a tax pro who stays abreast of these or for you to immerse yourself in the latest tax news. The latest version of the Tax Cuts and Jobs Act passed by the house reduces the mortgage interest to the first $500,000 and it ends mortgage interest deduction for second or even third homes. As this Huffington Post article notes, “Currently, you can deduct qualifying mortgage interest up to $1.1 million on your primary residence plus one other home.”

Tax season approacheth and pulling the covers over your head—literally and/or figuratively—isn’t going to help. Take heed of these money-saving tips this tax season, however, and you won’t believe how painless it will be.

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