LOS ANGELES – May 13, 2021 – (Newswire.com)
Now that tax season is here, you may be wondering if there are any ways you can save money on your taxes. By using the right strategies and doing your research, you’ll be able to keep more of your hard-earned money this year. Here are some money-saving tips for doing your taxes in 2021.
Tip #1: File Your Taxes on Time
Filing your taxes accurately and on time can help you avoid fines and other issues. You don’t want to pay more than what you owe this year, so doing this will help you save money. The sooner you file and pay your taxes, the less you’ll owe. Luckily, the tax deadline has been extended to May 17 this year, so you have an extra month to file your taxes.
Tip #2: Adjust Your Filing Status
Married couples filing jointly may be able to take advantage of additional deductions if they file separately. Examples of this are medical expenses, which are capped in the tax code, and child tax credit, which is available to both spouses when they file separately.
Tip #3: Tax-Loss Harvesting
If you are invested in the stock market, sell the holdings that are currently showing a loss. That loss can be written off, reducing the amount that you’ll have to pay in taxes.
Tip #4: Invest More in Your Retirement Plan
The maximum annual contribution allowed by the IRS for 401(k) plans is $19,500. It’s $6,000 for traditional IRAs. These contributions are tax-deferred and you can continue making them up until the tax deadline, giving you an opportunity to cut down your tax bill.
Tip #5: Open and Fund a Health Savings Account (HSA)
HSA contributions are also deductible and can be made up until the tax deadline, so you can open a health savings account prior to May 17 and deposit funds that will be deductible on last year’s tax filing. You may need to change your insurance policy to do this.
Tip #6: Work-from-Home Expenses
Many workers had to spend at least some time working from home in 2020. There are multiple deductions available for you if that was your situation. The IRS allows $5 per square foot up to 300 square feet. Some states allow you to write off portions of utility and rent payments.
Tip #7: Medical Miles and Charity Miles
Miles traveled for medical reasons are deductible at the rate of 20 cents per mile. Traveling for charity is deductible at the rate of 14 cents per mile. Take advantage of these, along with any miles traveled for business purposes. These deductions add up.
Tip #8: Education Credits
The American Opportunity Credit provides up to a $1,000 refund on tuition expenses. Grad school students may be eligible for a Lifetime Learning Credit, which is a deduction of up to 20% of the first $10,000 in eligible expenses, which includes tuition and books.
Tip #9: The Earned Income Tax Credit
Make sure to take a look at your earned income tax credit (EITC) this year. The EITC is a refundable tax credit that helps low-income and moderate-income workers, especially those with children. The Consolidated Appropriations Act (CAA), which was signed into law in December of 2020, allows you to use your 2019 income to calculate the EITC if it’s higher than your 2020 income.
Consult with a Tax Professional for More Deductions
The deductions and tax savings strategies listed here are available for most taxpayers. A professional tax preparer can go over other deductions that apply specifically to your situation, such as mortgage interest credits and green energy credits. Consider consulting with a tax professional so you don’t end up paying more than you have to when you file on May 17.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
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How to Save Money on Your Taxes in 2021
