Each year there are millions of dollars of tax deductions and credits left on the table. The Government Accountability Office found that 2.2 million people who took the standard deduction could have reduced their tax bills by an average of $438 if they had itemized. That totals around a staggering $1,000,000,000 in untapped savings. That humongous figure is a gigantic amount of potential savings!
There's one week left until Tax Day. Here are some words of wisdom from SaveUp's Certified Financial Planner, Catherine Hawley, about saving on your taxes. Please consult your tax adviser to better understand the specifics of your unique situation. However, Catherine gives us some insight on some common deductions and credits, we Americans, aren't taking and see how we can utilize them to save.
Here is Catherine's "Top Ten List" of ways to save on taxes that you may not have taken advantage of before.
- Out-of-pocket charitable contributions: Keep receipts and if the amount is over $250, make sure the charity gives you documentation of your gifts.
- Job-hunting costs: For these costs to count, deductions must exceed two percent of your adjusted gross income. Unfortunately, this doesn't count for first-time job seekers.
- American opportunity credit: This credit could return up to $2,500 to you on the first $4,000 of qualifying college education expenses.
- Student loan interest paid by parents: The payment is treated as a gift. If your child files a separate return, you can deduct up to $2,500 of the interest paid.
- Health insurance premiums: You can deduct the amount you pay in health insurance premiums when calculating your adjusted gross income.
- Medical and dental expenses that exceed 7.5 percent of your adjusted gross income (AGI): You can only include medical expenses paid during the calendar year. It is a good strategy to pool expenses in one year if possible. The IRS also allows you to include transportation cost to the medical treatment so be sure to include those figures in your calculations.
- Casualty, Disaster and Theft Losses: These are losses related to your home, household items or vehicles caused by a sudden and unexpected event such as a flood, hurricane, tornado, fire, earthquake, etc.
- State sales tax deduction: You can choose to take a deduction for either the state and local income tax (people generally remember this deduction!) or the state and local sales tax. Taking the sales tax deduction will most likely make sense for people who live in states without income tax.
- Gambling Losses: This is not a "pass-go-for-free" for getting over-zealous in Vegas. It simply means you can deduct your gambling losses up to the amount of winnings you incur.
- Tax return preparation expenses: This is a miscellaneous deduction that has limits, but is worth taking.
Now that you have some tax saving tips, why wait for April 16th? File your taxes in a timely manner to see what savings might be applicable to you.
At SaveUp we reward you for good financial actions; including saving money and filing your taxes on time! One of the many prizes you can win is a TurboTax sponsored prize to double your refund. Don't let your portion of $1,000,000,000 go to waste and use that new found surplus to save up!