5 Strategies To Save You Money This Tax Season
It’s tax season which means millions of Americans will turn to Uncle Sam to give back what they overpaid in taxes last year. The timing in which consumers file plays a major role in the size of their return checks meaning the closer to April 15th you file the better. Filing after April 15th will result in penalties and interests thereby decreasing the size of your check.
There’s also one other reason to file early – identity theft. Filing early will help you beat identity thieves who lurk to strike this time of year, filing fraudulently in your name. A 2013 US Treasury audit says “billions of dollars in potentially fraudulent refunds continue to be paid” as a result of identity theft.
“Knowledge is power and time is often money, but what if you don’t have the time to empower yourself with knowledge?” asks Reed Abedeen, a partner at Safeguard Investment Advisory Group, LLC. “For many households, that often means losing out on thousands of dollars through tax deductions.”
It’s safe to say that no one likes losing money. Yet, each year 7 million Americans leave money on the table either because they failed to file taxes altogether, filed their taxes late or didn’t know that they were eligible for certain tax credits.
In order to maximize the amount that you get in tax returns, Abedeen offers 5 strategies that may be relevant for your family this tax season.
1. Take tax deductions for capital loss.
“If your capital losses are more than your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately,” Abedeen says. “However, you may deduct capital losses only on investment property, not on property held for personal use.”
This may not apply to you unless you have property you own that’s used for investment purposes. So that doesn’t include anything that’s your personal property. If you have investment properties however and the total value of any losses is higher than the gains, then this applies to you.
2. Contribute the maximum amount to your retirement fund.
You can contribute up to $5,500 to an IRA in tax-year 2014, or $6,500 if you are age 50 or older. If you contributed $5,500 to an IRA and fall in the 25 percent tax bracket you will save $1,375 on your 2014 tax bills. Be sure to find out if you’re eligible for this tax credit and make sure you understand the deadline for the 2014 deduction.
The deadline to contribute to an IRA account for the 2014 tax year is Wednesday, April 15, 2015. If you make a deposit between January 1 and April 15, be sure to tell the financial institution which year the contribution is for so you can apply for the credit correctly.
3. Seek the help of an advisor, fees are tax-deductible.
In order to maximize and not leave money on the table it may be a good idea to enlist the help of a financial professional like a Certified Public Accountant to file. Although spending money on a financial advisor may not be in your budget, seeking help might actually save and make you money. You may be able to take advantage of a free initial consultation.
4. Gift assets to children or someone you trust.
Anything you own can be gifted to anyone you want – cash, stock, a car, a house or a life insurance policy, pretty much anything you own. But in order to file a gift tax return on an asset it has to be valued at less than $12,000, which is not taxable. According to Abedeen, “If the fair market value of the gifted asset is more than $12,000 per person per year, but less than $1 million, there is the requirement of filing a gift tax return, but you won’t be taxed. The gift still is not income taxable to the recipient.”
5. Deduct a home-based office when used for work.
If you use part of your home for business, you can count that as a deductible regardless of whether you own a home or rent. Abedeen says, “Calculate the square footage of your home office and divide the area of your office by the area of your house. If the percentage is 14 percent, for example, that represents the percentage of your total home expenses that can be allocated toward the home office deduction. For further questions, consult a professional.”