Tax Tips for Individuals
Get your refund money during the year. Instead of giving the IRS and State Governments, adjust your withholding and get your money when you need it.
Example: You get a $4,000 refund every year. Change your withholding so that you get the money as you earn and reduce your refund to $500. This will give you an extra $67 per week to live on.
Consider purchasing a house.
Don’t waste money on rent unless rent is part of a bigger financial plan. By paying a mortgage the interest is deductible, along with any property taxes you pay. You could save yourself hundreds or even thousands every year. But remember that a tax deduction still costs you money. For example, if you pay $10,000 in interest to the bank and your tax rate is 25% it will only save you $2,500 in taxes and you are still out the $7,500 paid to the bank. I would recommend you becoming debt free and then give $10,000 to charity (a certified 501c3) and you will have the same tax deduction without paying interest to a bank!
Save for retirement.
Save for your retirement and give yourself a tax break at the same time. The contribution limits are listed below.
||Under Age 50
||Age 50 and Older
*Based on 2009 and 2010 figures
Get your undergrad or post grad degree.
If you’re paying for undergrad or post grad courses you may qualify for the lifetime learning credit. This credit is worth 20% of your qualified tuition bill, up to $2,000.
Also, as long as you are in your first four years of post secondary education, you may qualify for the new American Opportunity Tax Credit. You get a dollar for dollar credit on the first $2,000 in tuition expenses; followed by an additional 25% on the next $2,000 in tuition. The credit will not exceed $2,500. This credit is partially refundable, and it could give you an additional $1,000 in your refund.
Save money on health care.
Flex spending plans are a wonderful break to taxpayers. These plans allow you to defer taxable income from your paycheck so that you can pay for your medical expenses. However, you will no longer be able to use them to purchase over the counter medicine, but you still get a break on prescriptions and other medical procedures.
Don’t Steal From Your Retirement.
Many taxpayers are using their retirement money to pay off debt. This will increase your tax and hit you with a 10% penalty. Consider using the Debt Snowball or giving us a call for financial coaching.