Tax season is here again. If you’re an independent contractor or business owner, then you most likely are in the process of going through a year’s worth of P&L, expenses, and calculating the taxes you owe by your gross income. The question undoubtedly arises – are you spending too much on taxes?
For those who have to do their taxes, they understand a lot goes into paying Uncle Sam. They have quarterly payments, which is expensive as it is. Tack on the need to prove their income and the taxes they paid for the previous year and it can get overwhelming.
Most taxpayers would rather just pay the full sum to avoid tax rejection or fines. What if you knew specific deductions and write-offs that could lessen the tax burden? The following tax advice will show you how to save money on your taxes.
Do you have an education credit? If you’re a student, consider looking into the American Opportunity Tax Credit.
They cover the full tuition amount (at least the first $2,000) and a quarter of the next $2,000 you spend. Plus, if you make less than $80,000 (or $160,000 if married), you qualify for the full credit.
You can also get a credit for graduate school. The Lifetime Learning Credit covers the first $2,000 and 20% up to $10,000. You receive the full credit if you make under $55,000 or $130,000 if married.
There are restrictions on loan deductions.
Interest deductions on loans such as a mortgage or student loans require the debtors to pay off the entirety of the loan. If you’re dependent and your name isn’t on the loan, you could get a cash payment.
For example, say your parents are paying off your student loan or car payment. If you claim as a dependent, those interest write-offs are given to you in cash. You can deduct a couple of thousand dollars without having to itemize your return.
Refinancing a mortgage can give you a tax deduction. This deduction will help keep off-set taxes at bay. With this tax advice, if you sell a home or pay it off, you can deduct the un-deducted points, giving you a hefty tax return.
Unemployment and Children Deductions
If you’ve been unemployed for the long-term, you can deduct some taxes you spent while seeking employment.
This can include gas and mileage (especially if you drove long distances for a job interview), Internet, employment agency fees, website and printing fees, and any meals and lodging away from home.
Keep in mind, these costs can only be deducted if you weren’t employed for the year and spent the whole year seeking employment.
In addition, you can get some deductions when you have kids. If both parents work full-time, you can get a deduction for the cost of daycare.
Get More With This Tax Advice
Doing your taxes is a tedious process. However, when you know how much you can save, doing your taxes isn’t so bad.
Are your taxes too complicated? If you need an accountant, contact us. Some things are best left to the experts. We’ll make the process as streamlined as possible for you.
Parker Business Consulting & Accounting, P.C. is a unique firm with more than a combined 75 years of experience in private industry, coupled with a strong background in public accounting. This combination enables us to provide valuable assistance based on direct experience with many of the same issues faced by our clients.