Tax season is on its way, and now is a great time to start thinking about ways to lower your tax liability and increase the size of your refund. A larger refund means more money in your pocket to use how you want.
These five common types of itemized deductions could help lower your tax bill:
- Charitable Donations. Most donations made to nonprofit organizations can be claimed on your taxes. Just make sure you have a receipt or bank record of the donation that includes the organization name, date of donation, and amount donated. For donations of goods, such as used clothes and household items, record the fair market value of the items donated.
- Medical and Dental Expenses. If this year’s medical and dental expenses for your family exceeded 10% of your adjusted gross income (or 7.5% if you or your spouse is age 65 or older), then you can deduct those expenses on your taxes.
- Homeowner Expenses. If you own your home, take advantage of tax deductions for amounts you paid towards prepaid interest, property taxes, and mortgage insurance.
- Education Expenses. If you, your spouse, or an eligible dependent spent money on some form of higher education, then you may be able to claim a tax deduction for the amounts you paid towards tuition, books, supplies, fees, and even certain types of transportation.
- Casualty/Disaster/Theft Losses. If you experienced a natural disaster (such as flood, fire, hurricane, earthquake, etc.) or were the victim of theft, you may be able to claim losses to your home, vehicle, and/or personal items.
As always, check with your tax advisor as to what deductions you qualify for, and ask if filing itemized deductions makes sense in your situation.
Once you receive your tax refund, make sure to use the money wisely. It might be tempting to blow all your refund on a trip, a new phone, or a day at the mall. But being responsible with your refund could help you get ahead with your finances. Consider using your tax refund to start an emergency savings fund or add to your current savings.
If you are in debt, putting some or all of your tax refund could help pay off one of your credit card balances. But if you’re struggling with $10,000 or more in debt, your tax refund might not be enough to relieve you of your debt stress. Freedom Debt Relief could help you put $10,000 or more in unsecured debt behind you faster and for less. Request a free evaluation today to find out if we could help you make debt a thing of the past.