Though it hasn’t gotten to the point the Beatles envisioned when they said that if you take a walk they’ll tax your feet. Like it or not, taxes are a part of almost everything we do in life. There are, however, ways to save on your taxes through your life’s transitions.
Here are 12 tax tips to help you save through major life events.
- Deduct your tuition. Education expenses may be tax deductible if they maintain or improve skills required in your employment.
- Invest in a 529 plan to save for your children’s education. You won’t get a tax deduction, but there won’t be tax on the earnings and growth of those funds if they are used for education.
- Tally the cost of books and supplies purchased for school. Expenses directly related to your college education are tax deductible and may put more money back in your pocket.
The Working World
- Invest in 401(k)s and IRAs as soon as possible. Small contributions growing from an early age are more valuable than large contributions made years later.
- Learn about your company’s fringe benefits, such as tuition assistance plans, free employee counseling, mass transit commuting assistance, Medical Savings accounts and other tax-free perks.
- Get next year’s refund now by adjusting your withholding so that you break even with the IRS at the end of the year. If you need help saving, have money automatically deposited to savings from each paycheck.
- Only borrow from your 401(k) in an emergency. The interest you pay on the loan won’t be tax deductible, and you will lose the capital appreciation you’d enjoy if you’d left it invested in the plan.
- Put tax-free money into your employer’s dependent care plan. Though this will reduce your child and dependent care credit, it’s still a good financial move for most taxpayers.
- Claim the child tax credit on your taxes. It is an additional $1,000 credit you may be able to claim for each of your dependent children under 17. For married couples with income over $110,000 or $75,000 for a single parent, the credit phases out. TurboTax will ask you questions about your dependents and give you all the deductions and credits related to your dependents that you’re eligible for.
- Gather your receipts for dependent care. You may be able to claim the dependent care credit even if you don’t work, if your spouse works and you are a full-time student or disabled.
- File jointly. Married couples filing separately are barred from many deductions and credits, so unless you are trying to distance yourself from a tax evading spouse or a soon-to-be-ex, a joint tax return is your best move. TurboTax selects the filing status that gives you the biggest tax refund.
- Don’t overlook expenses eligible for the child and dependent care credit such as nursery school, private kindergarten, after school programs and day care.
TurboTax will ask you simple questions about your life events when you file your taxes so you can take advantage of valuable tax deductions and credits and get your biggest tax refund.