New Year, New Tax Implications

Tax Planning

Happy New Year! Although it’s a brand new year not much has changed in tax laws for 2016 taxes.  What may have changed for you are life changes like having a baby, a new job, or moving.  Along with a new year often comes life changes which can reveal new tax implications, but life changes don’t have to make tax time daunting.  TurboTax has you covered when it comes to the new year and new tax implications for you.  TurboTax ask you simple questions and gives you the tax deductions and credits you’re eligible for based on your answers.

Right now, let’s look at 2017 and what you can do to save on your taxes when you file.

Keep records. I’ve said it before and I’ll say it again — keep records. Really, do it, that’s the first step to saving on your taxes: You can’t take a tax deduction for an expense you don’t remember and can’t prove. This is especially important for those who are self-employed or an employee. At the very least, get a large envelope into which you can place all important tax papers during the year, and put it where you can find it. When it is time to prepare your taxes, you’ll have all the documentation you need at your fingertips.

Claim the earned income credit. If your income is under $53,930 in 2017 and $53,505 in 2016 and you have children, you likely qualify for the earned income credit. Some people without children can also qualify if their income is low. According to the IRS, 20% of people eligible to claim the credit fail to do so. If you are eligible, don’t miss out on this valuable tax credit.

Contribute to retirement plans. Hey, you aren’t getting any younger, and the longer you wait to contribute to retirement plans, the harder it is going to be to realize your dreams in your later years. If your employer matches your contributions, so much the better. But if not, you should still contribute to receive  the tax deduction. A $100 contribution to your retirement plan will cost you just $70-$75 in net pay, so the tax deferral is like getting free money. And if your employer doesn’t offer a retirement plan, you still can contribute to an IRA or a Roth IRA. You can contribute up to $18,000 to an employer retirement account and $5,500 to an IRA, and more if you are 50 or older.

Claim charitable donations.  Don’t forget that when you cleaned out your closet this year and donated to charity that your charitable donations could be worth a valuable tax deduction if you itemize.  If your donation is $250 or over the charitable organization should have given you a receipt or acknowledgement proving your donation.  Even if you donated money on your credit card on December 31st you can still take the deduction on your 2016 taxes.  If you didn’t donate last year, 2017 is a great year for you to clean out closets and give things you don’t want or need to a charity, so others can use them and you’ll get a tax deduction to boot.

Cash in on your education. If you or a family member started college last year or will be starting college this year, you may be eligible for a tax credit for your education, through the American Opportunity Credit or the Lifetime Learning Credit.  You should receive a Form 1098-T for expenses paid for college so make sure you take advantage of these valuable tax credits at tax-time.

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