If you already e-file your taxes, feel free to skip ahead. These are the obvious perks when you file electronically: It saves you and the IRS time, it saves some trees, and it leads to a quicker refund.
But did you also know that using tax filing software helps take the headache out of tax season overall? Instead of educating yourself on the difference between deductions, exemptions, and credits, all you have to do is answer a few questions about your life and let the program work out the details.
Your filing status is the cornerstone of your paperwork for the IRS. If you get this one wrong, the ripple effect can create errors throughout your return and even trigger an audit. But small shifts in filing status can boost your refund.
Consider this: Most married couples file jointly, but sometimes filing as individuals can save money. This can be the case if one spouse incurred heavy medical, travel, or work-related expenses. Even an individual without kids could include a parent as a dependent if that individual is paying a majority of the parent’s living expenses.
Tax deductions are items that cost you money throughout the year, but can be used to lower your taxable income. Many people still miss key deductions, so here are some of the most common (and a few of the most overlooked):
Credits have a much more exciting impact than deductions, yet many Americans miss out on credits for which they qualify. For example, 20 percent of eligible Americans don’t claim the Earned Income Tax Credit, which is available to employed individuals with modest incomes.
Credits are a lot easier to understand than most of the tax season vernacular. If you are eligible for a $1,000 tax credit, that’s not some random number you have to plug into a complicated formula. It just means you owe $1,000 less than you did before. Cut and dry.
Did tax season sneak up on you again this year? It happens to all of us, but to get the most bang for your “tax-deductible” buck next year, be sure to plan ahead.
Do you have enough saved to pay your January mortgage in December? This can get you added interest for your mortgage interest deduction. If possible, contribute as much as you can to your IRA because that reduces your taxable income. You can also invest in Energy Star certified technology such as new windows, doors, or solar panels for additional credits. Remember, tax laws are always changing, so it’s important to stay educated throughout the year.