It’s going to be tax season again before you know it. While taxes are probably the last thing you want to think about in the middle of summer, you may stand to save a good amount of money on your taxes by taking some simple preparative steps ahead of time.
Here are a few tips from a tax service in Des Moines, IA to help you save money on your taxes this coming year:
- Determine your eligibility for the earned income tax credit: The earned income tax credit applies to many low- and moderate-income taxpayers, giving you the potential to get up to $6,000 in credit. If you earn less than $50,000, find out if you’re eligible to apply for this tax. Even if you didn’t qualify in past years, you might this year if, for example, you became a new parent or had other big life events happen.
- Get your child tax credits: The tax code allows credits for child care costs and the child care credit, up to $1,000 for each child under the age of 17. Plus, your children count as additional dependents in your household.
- Take advantage of your mortgage: Mortgage interest payments are tax deductible, meaning, at least from a tax standpoint, you benefit by holding on to your mortgage as long as possible. Of course, you need to figure out what makes the most sense for you in the long run—getting the additional tax breaks from paying mortgage interest, or paying off the debt early to save money on interest. This might take a bit of calculation on your part.
- Put more money into your retirement accounts: The money you put into certain types of retirement accounts, such as IRAs and 401(k)s, is deductible to a certain extent. Therefore, in addition to giving yourself a bit more toward your savings, you can also benefit from extra tax deductions by putting more money into your retirement accounts.
- Give money away: Charitable contributions are tax deductible, and also help put money toward worthy causes in your community. You can also give a certain amount of money away each year without having to pay taxes on that dollar amount.
- Know which medical expenses are tax deductible: There are certain medical expenses that are tax deductible, including common items like medical supplies, breast pumps, acupuncture and more. The IRS website has a full list of tax deductible items.
- Improve your energy efficiency: Certain types of energy efficient appliances and other equipment (like solar panels) qualify you for some energy-based tax credits from the federal government. The idea is to reward people for making their homes more energy efficient.
With the widespread changes to the tax code this year, you might have some questions about how your tax situation has changed from previous years. For more information about the savings strategies you can employ, contact our tax service in Des Moines, IA today and we’ll be happy to work with you.