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Tips to Save You Money On Your Tax Return and Lower Your Taxes Consider The Consumer

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Tips to Save You Money On Your Tax Return and Lower Your Taxes

It’s quickly approaching folks! Tax Day is Tuesday, April 17, 2018. If you haven’t filed yet, here are some last minute tips to save you money on your tax return and lower your taxes.

Plan for Retirement

  • Contribute to an IRA. You have until Tuesday, April 17, to contribute to a 2017 traditional IRA—a good way to save money and potentially reduce your taxable income. The maximum deductible contribution is $5,500 for those under age 50 and $6,500 for those 50 and older. Your deduction will be limited based on income and whether you or your spouse have a retirement plan at work.
  • Add to a SEP IRA. Do you own a small business? Then you might be eligible for higher income and contribution limits for tax-advantaged retirements savings through a simplified employee pension, or SEP, IRA. Go to irs.gov and search for IRS Publication 590-A, “Contributions to Individual Retirement Arrangements,” for details.
  • Contribute to a young relative’s IRA. Youngsters and lower-income workers of all ages could benefit from a contribution to their IRAs in three ways. One, they could be eligible for the Saver’s Credit; for 2017, single filers who make $31,000 or less and contribute to an IRA can get a tax credit worth up to $1,000. Contributing to a traditional IRA also leaves workers with less taxable income, so they’ll pay less in taxes. And if they’re not medically insured, they can qualify for a larger health insurance premium tax credit. For someone to save money through these methods, the IRA contribution must be made before the the tax deadline.

Increase Your Health Savings

  • Contribute to a health savings account (HSA). You can still contribute to an HSA and have it count toward your 2017 taxes.

But you can do this only if your health coverage for 2017 was considered a high-deductible insurance plan. HSA contribution limits for tax-year 2017 are up to $3,400 for an individual and $6,750 for a family. If you’re 55 or older, you can add $1,000 to those limits. Regardless of your income, you can get a tax break. To save money this way, you’ll need to set up and fund a health savings account before midnight on Tuesday, April 17, the tax-filing deadline.

Revisit Last Year’s Tax Returns

The tax code allows for some losses or unused tax benefits to be carried over to subsequent tax years. Taxpayers often overlook this option, according to Barbara Weltman, contributing editor of “J.K. Lasser’s Your Income Tax 2018” (Wiley, 2017). For example:

  • Business expenses. If you had a home business that lost money in 2015 or earlier, you can carry over an unused home-office deduction. If you based the deduction on your actual costs, you weren’t able to make a deduction to reduce your business’s income for 2016. That carryover can be used for an unlimited period.
  • Capital losses. You can do the same thing with investment losses. Capital losses can offset capital gains, and then up to $3,000 of ordinary income ($1,500 for married people filing separately), until they’re used up.
  • Charitable contributions. In the rare case where your charitable donations were so large that they bumped up against the IRS rule on charitable deduction limits, you can carry over the remainder into subsequent years, for up to five years. (Generally speaking, you may deduct up to 50 percent of your adjusted gross income, but 20 percent and 30 percent limitations apply in some cases.) (via Consumer Reports)

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