Every time you turn on the news, you see another story about a corporation or large business exploiting a loophole that keeps them from paying millions in taxes. Shouldn’t everyone be able to take advantages of loopholes, not just the super-rich? If you find yourself pinching pennies every time tax season comes around, you might want to read these helpful tips on how you can start saving money on your taxes.
You work hard for your money, and you should be able to spend it as you see fit. Obviously, Uncle Sam has to take his share, but don’t you think Uncle Sam might be taking a bit more than he should? It’s time to get creative with those tax deductions and write-offs. As much as we would love to write-off that trip to Cancun as a business expense, here are some helpful tips that won’t make an IRS agent laugh in your face or turn you into an outlaw.
If you move locations for work and your employers don’t cover it, you can write off some of those moving expenses. Are you self-employed? If so, you can write off almost all of your moving expenses. Even if you get fired from a job that you moved for, you can still write off the bulk of your expenses. As long as you meet the required parameters for travel deductions, the IRS will let you write off:
- Storage fees (up to 30 days)
- Hotel rooms
- Utility disconnections from your old home
- Travel to your new home ($0.17 per mile)
- Packing and shipping costs, including the cost of a moving company
Consolidate Back Taxes
It’s not uncommon to get behind on your taxes. Family emergencies happen and medical expenses can come out of nowhere. Getting behind on your taxes is nothing to be ashamed of but it’s definitely something you can’t ignore. Fortunately, the IRS is open to renegotiating the amount you owe and the rate at which you pay it back. If you find yourself in this situation, you might want to seek out IRS back tax help from a qualified tax attorney or CPA. Renegotiating the money you owe to the IRS can be a great way to reduce the amount of taxes you pay the IRS.
If you have loans on your home or you have student loan debt, you can write off the interest you pay each year on your tax write-off. Even if you aren’t the one paying back your student loans, it’s still possible to write off the interest. If you qualify, the deduction can be as high as $2,500 each year. Note: if you make over $80,000 a year as a single payer or you are claimed as a dependent, you won’t be able to qualify for this tax credit.
IRA Retirement Savings
It’s always a good idea to start saving for retirement no matter how you are doing financially. Even if it’s only $20 at the beginning, you should always try to put a little bit aside each month. One of the best ways to save for retirement is with an IRA. The beauty of an IRA (Independent Retirement Account) is that the government can’t tax it or touch it until you pull the money out for retirement. By the time you retire, you will most likely be in a lower tax bracket—which means the taxes on your withdrawal won’t be too painful. This can be a great alternative to having your own stock portfolio. Typically, IRA funds are invested in either index accounts or massive, conglomerate stocks.
Having a home office can be a great way to save money on your taxes. However, out of all the ways you can write off expenses for your tax return, this one is especially tricky. Home office deductions will immediately catch the attention of the IRS, as it’s one of their biggest red flags. If you plan on having a home office as a permanent set up, make sure you use the office exclusively and regularly for work. You will more than likely get audited if you use home office deductions to their full extent; be fastidious in your bookkeeping to expedite the process. One of the easiest ways to avoid an audit is to take the flat rate of $5 per square foot on your home office deduction. The IRS is unlikely to come after you if you opt for the flat rate.
Tax credits and loopholes aren’t lucrative, and they aren’t exclusively reserved for the wealthy, either. Read up on where you can be saving and keep a few extra dollars in your pocket come tax season.