As fall turns to winter, you might be pondering your tax filing plan already – we hope you’re at least saving those receipts! Besides preparing and maintaining your records, files, and more, there are a few things you can do to increase your deductions and credits, therefore boosting your refund. The best part: you have plenty of time to take advantage of them! Read below to choose your upgrades.
Making contributions to your retirement? Regardless of income, you should be. If you have low to mid income, you can take advantage of Saver’s Credit, worth up to $2,000 depending on your AGI (or $4,000 filing jointly). You must have an AGI less than $60,000 if filing jointly, $45,000 for head of household, and $30,000 for all other filing statuses.
If you aren’t able to take advantage of Saver’s Credit, you can still get a deduction. If don’t have one already, open an IRA (if you want to open a Roth IRA, these contributions are not deductible). You have until April 15, 2017 to open one and to make contributions. You can contribute up to $5,500 ($6,500 if you’re over 50), or your taxable compensation for the year, whichever is smaller.
In addition to the above, you can make an extra contribution through your employer-sponsored 401(k), 403(b), or retirement plan. The limit is $17,500, so if you haven’t met that and you can make an extra payment, take the opportunity to save some money that will not be taxed.
The general idea with all three of these areas is pre-payment in order to reap the maximum deduction benefits.
Meeting the threshold of qualifying medical expenses in order to take the deduction can be difficult, but take into consideration what you’ve paid this year, and what you can pre-pay for next year, and you might be able to meet it. Say you’ve already spent a significant amount, and you’re only a few thousand away from the threshold. Consider stocking up on contact lenses, pre-paying for procedures like braces, teeth whitening, or Lasik. Alternatively, if you’re not near the threshold and you can anticipate those costs for next year, wait to start those payments until 2017, and you can meet the threshold then.
There are also significant deductions associated with making extra payments on tuition and home mortgages. You can make these payments with a credit card if you don’t have the immediate funds.
While you’re anticipating the tax season and putting together your game plan, you may need to change the information on your W-4 and adjust your withholdings. If you might owe more than expected, increase your withholdings by claiming fewer allowances. Likewise, if you are set to get a refund, you might want to increase your allowances for bigger paychecks, especially as we move into the holiday season.
These are the big moves you can make before tax season starts – we bet you can take advantage of at least one! One last tip: if you’re planning on itemizing your deductions, go ahead and making some extra charitable donations. Stay tuned for the best ways to give this holiday.
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