Doing your taxes is the worst. And yet, there is no escaping this yearly chore. If you’re single and have just one job, it shouldn’t be too difficult. Best case scenario: You get a nice check in the mail. (Worst case: You owe Uncle Sam). And with eight in 10 Americans getting a tax refund, there’s a good chance that the hour you spend on Turbo Tax (or talking with your accountant) will pay off — the average refund check is $2,800 (nothing to sneeze at!).With some help from Priya Malani at Stash Wealth, we put together a list of seven tax deductions and credits you might not be taking advantage of — but will help you save big this year. Taxes might be complicated, but these money-savers are pretty straightforward. Now how to spend that refund is a whole other story…
(For more advice on how to do your taxes, check out this story.)
This month, we're asking you to toss out everything you thought you knew about spring cleaning and give every corner of your life a refresh. The inspiration for a happier, clutter-free you is right this way.
One of the questions on the tax forms is whether anyone is claiming you as a dependent. Your parents can claim you until you’re 24, if you’re a full-time student. That gives your parents a $4,000 tax deduction. But, if you’re over 24 and/or your parents aren’t claiming you, you can claim yourself. After all, you’re dependent on yourself, right? Claiming yourself is called a personal exemption, and it will knock your taxable income down another $4k. You can take this exemption whether or not you’re married — though higher earners (this year, anyone making over $250,000) are not eligible.
The government wants you to save for your retirement almost as much as your mom does, and that’s why they offer a tax break for the money you stash away in your traditional IRA. Like most of these deductions, it depends on your level of income. But for your 2015 taxes, if you make any amount and the company you work for doesn’t offer a retirement plan, you can deduct the full amount of your contribution limit ($5,500).
If your company does offer a retirement fund, you can still open a traditional IRA, you just won’t be able to deduct the full amount. For more details on what you qualify for, click here, or ask a tax professional.
Almost all of us are struggling to pay down our student loans, and the government recognizes this (maybe not as much as we want them to, but still). So, there’s a tax break for the 43 million Americans who are paying for their education every month. You can deduct the interest you paid on the loan each year, up to $2,500. Not sure how much interest you paid? Thankfully, the loan company will send you a 1098-E and you can reference that form when you pay your taxes.
Good news? You can deduct this even if your parents are paying down your loans, as long as the loan is in your name.
The (kind of) bad news? If you make more than $75,000 a year, you don’t qualify for the deduction.
Looking for a job is the worst. It takes a ton of networking, research, and time spent printing your résumé at the local copy shop (or running out to pick up a $40 cartridge of toner for that joke of a printer you have at home). And, if you don’t live somewhere with great public transportation, you’re likely spending a ton of time in your car, driving from interview to interview.
Thankfully, the IRS recognizes job hunting is as sucky as paying your taxes, and they offer a tax deduction for these expenses, as long as it exceeds 2% of your gross adjusted income. If you made $40,000 last year, you can deduct the $800 you spent for your job hunt from your total income, and pay less in taxes. Sure, it might seem difficult to hit 2%, but those expenses add up quickly. Just make sure to save your receipts!
Did you cross a major relationship milestone this year and get married? Congrats! Not only do you probably have a kitchen filled with shiny new cookware, you also get a tax break from the government — if you and your S.O. fall within a certain tax bracket.
If you choose to file jointly, the government offers a host of tax credits that aren’t available to single filers. But, there can also be some drawbacks, depending on which tax bracket you fall into once you combine your income. TurboTax offers some advice on whether to file jointly or as individuals, however, working with a tax advisor can also ensure that you make the best decision in order to save the most money on taxes.
You graduated from college, but you really consider yourself a lifelong scholar, and this year you’ve been taking a few evening classes toward a graduate degree. The good news is that the government will help you pay for some of those costs.
The Lifetime Learning Credit covers tuition for graduate and professional degree-courses, and there’s no limit to how many years you can take advantage of the $2,000 credit. But, you only qualify for the full amount if you make less than $52,000 per year.
With a tight budget, small paycheck, and high student-loan bills, it’s not likely you’re donating a ton of money to your favorite charity (maybe your time, but unfortunately, time isn’t tax deductible). If you do find yourself able to give generously to a cause you care about or your alma mater, you can enjoy a tax break for your good deed.
Charitable contributions are itemized deductions, so it takes a little bit more work to get the money back — and it might not be worth your time if you’ve donated just a small amount of money. There are several factors to consider, including the donation amount and your tax bracket. To find out if your yearly donation to NPR is worth doing an itemized deduction, check out Turbo Tax’s It’s Deductible calculator, which will do all that number-crunching for you.
(Even if you don’t save hundreds in taxes, donating to a good cause is always a good idea.)
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