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Few people actually like filing their federal taxes, but knowing you're saving as much money as you can when you file your return makes the process a lot less painful.
Federal Tax: Money-Saving Secrets
It's well known that if you write a check to a qualified charity, or donate clothing to goodwill, that this gift is tax deductible. However, many people file their federal tax return each year without taking advantage of other money-saving options.
Tip #1: Donate Appreciated Stock
If you own stock where the value has appreciated, you will owe the IRS capital gains on that appreciated value. If you donate the profits you realize from selling the stock to a charity, you'll still have to pay the capital gains tax bill. If, however, you donate the appreciated stock itself directly to a qualified charity, you will not only escape capital gains tax liability, you are allowed to deduct the full asset value of the stock on your federal tax return.
You cannot deduct the time you spend volunteering for your school fund raising, church or qualified charitable organization. However, your travel expenses for getting there and back are tax deductible, including gas, tolls, and parking. If you use your vehicle in connection with your charitable volunteering, such as making food deliveries, you can deduct the gas it takes to do those activities as well. You can keep track of the actual amount of gas you use, or you can take the standard federal tax deduction of 14 cents per mile.
Tip #2: Use Your Alimony to Save Money
It's commonly known that alimony payments are tax deductible, but did you realize that if you receive alimony and you don't have a paying job, you are allowed to make IRA contributions and deduct your contribution? The IRS treats alimony as taxable income, and alimony you contribute to an IRA is eligible for a federal tax deduction.
Tip #3: Don't Overpay Social Security Withholding
If you changed jobs during the year, you may have had too much social security tax withheld. Check the W-2's for both jobs. If the social security withholding exceeds the allowable maximum, you are entitled to get the difference back.
Tip #4: Health Savings Accounts
An HSA is a deferred income savings account that, like an IRA, is tax deductible, but unlike an IRA, you can access the money in an HSA as needed for your qualified health care expenditures without a tax penalty. Your pre-tax HSA contributions will reduce your taxable income. What's more, any income earned on an HSA is tax-free, whether it is investment income or accumulated interest.
One of the easiest ways to save money on federal taxes is to file electronically instead of hiring a tax preparer. Online tax preparation software programs, like Turbo Tax, are far less expensive for a basic return than the price of a human tax professional. Your return will be processed efficiently and accurately and you'll get your refund back a lot quicker.
Federal Tax: Money-Saving Secrets
It's well known that if you write a check to a qualified charity, or donate clothing to goodwill, that this gift is tax deductible. However, many people file their federal tax return each year without taking advantage of other money-saving options.
Tip #1: Donate Appreciated Stock
If you own stock where the value has appreciated, you will owe the IRS capital gains on that appreciated value. If you donate the profits you realize from selling the stock to a charity, you'll still have to pay the capital gains tax bill. If, however, you donate the appreciated stock itself directly to a qualified charity, you will not only escape capital gains tax liability, you are allowed to deduct the full asset value of the stock on your federal tax return.
You cannot deduct the time you spend volunteering for your school fund raising, church or qualified charitable organization. However, your travel expenses for getting there and back are tax deductible, including gas, tolls, and parking. If you use your vehicle in connection with your charitable volunteering, such as making food deliveries, you can deduct the gas it takes to do those activities as well. You can keep track of the actual amount of gas you use, or you can take the standard federal tax deduction of 14 cents per mile.
Tip #2: Use Your Alimony to Save Money
It's commonly known that alimony payments are tax deductible, but did you realize that if you receive alimony and you don't have a paying job, you are allowed to make IRA contributions and deduct your contribution? The IRS treats alimony as taxable income, and alimony you contribute to an IRA is eligible for a federal tax deduction.
Tip #3: Don't Overpay Social Security Withholding
If you changed jobs during the year, you may have had too much social security tax withheld. Check the W-2's for both jobs. If the social security withholding exceeds the allowable maximum, you are entitled to get the difference back.
Tip #4: Health Savings Accounts
An HSA is a deferred income savings account that, like an IRA, is tax deductible, but unlike an IRA, you can access the money in an HSA as needed for your qualified health care expenditures without a tax penalty. Your pre-tax HSA contributions will reduce your taxable income. What's more, any income earned on an HSA is tax-free, whether it is investment income or accumulated interest.
One of the easiest ways to save money on federal taxes is to file electronically instead of hiring a tax preparer. Online tax preparation software programs, like Turbo Tax, are far less expensive for a basic return than the price of a human tax professional. Your return will be processed efficiently and accurately and you'll get your refund back a lot quicker.
