6 Tax Deductions That Could Easily Get You More Cash
By:
Tax season: It's the Christmas of adulthood. Last year, the average refund was around $3,000 per person, according to CNN Money.
Was your refund missing those extra zeros or worse, did you owe? Let's keep the past in the past and polish up on some basic accounting.
One way to get a bigger refund is to maximize deductions. First thing is first: What the heck is a tax deduction? Simply put, the point of deductions is to reduce your taxable income, cutting back on the amount of taxes you owe the government. There are hundreds of ways to do this.
With Tax Day looming — it’s not until April 18 this year, so we get an extra three days to file — it's a great time to brush up on deductions so that rather than owing Uncle Sam, he’ll write you a fat check instead. (Or at the very least, you won't owe as much.)
1. Claim yourself as a dependent.
Did you know that you can claim yourself as a dependent when you do your taxes?
Depending on the circumstances, the IRS lets qualified taxpayers claim their relatives and children as dependents, which results in a reduction of taxable income. As weird as it may sound, you can also claim yourself as a dependent. You do depend on your own salary to survive, after all.
If you’re over 24, you can knock your taxable income down $4,000 by taking this deduction. The only catch is that you can't make more than $250,000.
2. Max out your retirement accounts.
If your employer offers a retirement plan, then you will definitely want to take advantage of it, ASAP. Everything you put into your 401(k) is tax-deferred (i.e., you don't have to pay taxes until you withdraw funds), which causes a reduction in taxable income for the current year.
If you haven’t started an account yet, don't panic. As long as you transfer funds ahead of Tax Day, you can contribute up to $5,500 to an IRA for the 2015 tax year — all of which is deductible.
3. Learn about savers credit.
This is another perk for future-thinking individuals. Savers credit rewards married couples who earn less than $60,000 and single folks who earn less than $30,000 for setting money aside for retirement. Qualified individuals can earn up to $1,000 back.
4. Write off your job-hunting expenses.
Today’s job market is difficult. You might sit through an insane amount of interviews before you land a gig.
The good news: The IRS lets you deduct expenses associated with your job search, provided you’re a professional who’s looking for a job in the same industry. Be sure to save things like train tickets and cab receipts.
5. Don’t forget your student loan interest, either.
You could still be footing your college bill, but here's a perk: Up to $2,500 in student loan interest can be deducted from your 2015 taxes.
6. Homeowners: Mortgage interest is your friend.
It's a common assumption to think that people in their 20s and 30s aren't ready to settle down but that's clearly not the case: Surveys show that Millennials are dominating the housing market.
As a homeowner, the IRS allows you to deduct your interest on up to $1,000,000 worth of mortgages.
Remember, preparing your taxes can be tricky business. If you don't feel confident enough to do them solo, a tax professional can definitely help.
