Taxes are the last thing you think about during the holidays. But strategizing before year-end can save you in your tax bill when you file next year.
Here are some common tips that you can take advantage of and lower your tax liabilities:
- Maximize your deductions
bunching your expenses and qualifying for a larger deduction could be a bigger tax bill discount for you than taking standard deductions. Plus, credits could be refundable too.
Popular IRS Deductions and credits that you can qualify for:
- Child and Dependent Care Credit
- Credit for the Elderly or Disabled
- Energy tax credit for businesses and Nonbusiness
- Health Coverage Tax Credit
- Lifetime Learning Credit and American Opportunity Credit
- Home Office deductions
- Employee Business Expenses
- Gambling losses
- Home Mortgage interest
- Student Loan Interest
- Teacher Educational Expenses
- Medical and Dental Expenses
- Bad debt
- Capital Losses
There is some minimum threshold to qualify for these tax breaks. For example, medical expenses that exceed 10 percent of your Adjusted Gross Income (AGI), Gambling losses up to the extent of your gambling winnings.
- Make your home energy efficient
There is a number of tax-deductible Renewable Energy tax credits that you can upgrade to your home, here are some of the more popular ones:
- Home Insulation
- Exterior doors
- Exterior windows
- Some roofing materials
- High-efficiency water heaters
- Central Air Conditioners
- Natural gas, propane for furnace
- Charitable donations matter
– If you have extra for this holiday, why don’t you give some to charities? Tax-deductible charities that mean a lot to you could be a generous way to be thankful for the holidays.
Check first for legit charities. You can go to Charity Navigator or FTC consumer website for the legit one in your area.
The IRS designates them as 501(c)(3) for it to be a tax-deductible charitable organization and claim a deduction on your taxes.
- Auto repairs and maintenance for ride-sharing drivers
The busiest time of the year for a ride-sharing driver will be the holidays. We also know that New Year will be packed and with all those Christmas parties you’ll definitely have some extra dough in your pocket.
Here are fast tips to keep track of your expenses:
- Keep a small accordion folder and label it for gas, maintenance, and food
- Your monthly phone charges and accessories are tax-deductible, keep a tab of those.
Get a mileage tracking app so you can separate the personal and business mileage in your car. Subscription to the app is deductible too.
Also, the holiday season is the most income that you’ll get with driving for Uber, Lyft and other ride-sharing services.
- Holiday Bonuses might be extra taxes
Bonuses are great! Having extra spending money for gifts is a plus.
But hold your horses, better save a portion of that bonus for taxes.
Some bonuses are taxed differently and you may need to pay for a separate bracket for that.
Therefore, you need to set aside at least 30% of the bonus for taxes to be safe.
Know more details about these common tax breaks and treat it like a gift for yourself and your family.
If you have any questions about your specific tax situation, you can call us or schedule to visit us for a document review.
