From the Patrick Parker Realty Blog Series
12 Ways to Save on Taxes Through Life’s Transitions
Here are 12 tax tips to help you save through these major life events:
2. The Working World: 401K(s), IRAs and Other Witholdings
3. Family Life: Child Care, Dependent Care, Married Couples
1. Deduct your tuition. Education expenses may be tax deductible if they maintain or improve skills required in your employment.
2. 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.
3. 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
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. Don’t overlook expenses eligible for the child and dependent care credit such as nursery school, private kindergarten, after school programs and day care.
Keep in mind that this is general information designed to help you put these valuable deductions on your radar. Patrick Parker Realty Agents and Realtors are not certified accountants. Please be sure to check with your tax adviser to see if you qualify for a particular credit or deduction.
Check back in with the Patrick Parker Realty Blog each Tuesday and Thursday for more Tax Season Blog Series’ Posts and sign up for the Patrick Parker Realty eNewsletter to have updates delivered to your inbox monthly.
The Blog Series will cover many topics such as How do I qualify for a home seller break?, How do I qualify for a home buyer break?, Do I have to report the home sale on my return?, What is the gain on the sale of my home?, What Are Home Renovation Tax Credits?, Deducting Mortgage Interest, Taking the First-Time Homebuyer Credit, How to Avoid Taxes on Canceled Mortgage Debt, Tax Incentives as they relate to Life’s biggest transitions, such as Marriage, the Birth of a Baby, Divorce, or the death of a Spouse and much more. New posts in this Blog Series will be published twice weekly.
For more information about paying taxes on the sale or purchase of your home or any other questions you have about this article please speak with your tax professional or visit www.irs.gov.