17 ways to save on your 2017 taxes
Friday, March 16, 2018
St. Patrick's Day is almost here, but it's not the lush Kelly green landscapes of the Emerald Isle we taxpayers are thinking about right now.
We want to know ways to save some greenbacks on our taxes.
Inspired by the man brave enough, at least in myth, to face down snakes and the March 17th day we honor him, here are 17 ways to round up some tax savings from the almost as scary U.S. tax code.
1. Non-cash charitable gifts: If you gave household goods to or volunteered at your favorite charity, those actions could provide you with some added itemized charitable deductions. The value of the goods you give count, as do out-of-pocket expenses and even mileage in connection with your in-person good works.
2. Moving expenses: You can write off many moving expenses as an above-the-line deduction when you relocate to take another job. That applies to even your first job.
3. Job-hunting costs: Costs associated with looking for a new job in your current career field can be claimed as an itemized miscellaneous expense on your 2017 Schedule A. This includes things like fees for resume preparation and sending it out, as well as employment or outplacement agency fees. Note, though, that you have to have enough of these assorted costs to exceed 2 percent of your adjusted gross income before you can claim them. on Schedule A.
4. Child (and others) care credit: Uncle Sam can help pay for some of the cost of putting the kiddies in day care while you and your spouse work (or look for a job). Day camp costs also count here. And the credit counts beyond care of minor children. You can use it for costs to care for others whom you can claim as a dependent.
5. Many medical costs: Being sick sucks. Being really ill sucks and costs big bucks. But at least in the latter case, you might have enough medical expenses to get past the 7.5 percent of adjusted gross income threshold to claim the costs as an itemized deduction. If you're close to clearing that hurdle, look for other medical costs to add, such as travel expenses to and from doctor-prescribed treatments, insurance premiums you pay for from already-taxed income and even no-smoking and alcohol- or drug-abuse treatments.
6. Retirement tax savings: Most folks already know that in certain cases, contributions to traditional IRAs (which can be made up to the filing deadline) are tax deductible. Those, along with money you put into a Roth IRA and/or a workplace retirement account, also could help you cut $1,000 off any tax bill you owe thanks to the Retirement Saver's Credit.
7. Educational expenses: Uncle Sam is generous when it comes to helping fund higher education. There are the above-the-like deductions for student loan interest and college tuition and fees you paid. And yes, in case you were wondering the tuition and fees provision did expire at the end of 2016, but in January was renewed retroactively for the 2017 tax year as part of some last-minute budget bill machinations. On the tax credit side, there's the American Opportunity Tax Credit, which offers dollar-for-dollar tax savings of up to $2,500 and possibly even more for some as a tax refund. And don't forget the Lifetime Learning Credit, which provide students — including those done with full-time schooling but who take courses to help them get ahead at their jobs — a credit up to $2,000.
8. Energy-efficient home improvements: Yes, this tax break also is back, again retroactively for 2017 taxes as part of the 2018 budget bill. These relatively easy home upgrades, such as insulation, certain roofing material and exterior doors, windows and skylights, could give you some dollar-for-dollar tax credit savings if you made any of them last year. So if haven't already used up the lifetime maximum $500 Nonbusiness Energy Property Credit claim, be sure to do so now. The option might not be back for 2018.
9. Sales taxes, local and for big ticket purchases: This tax break, most beneficial for folks who live in one of the few states with no income taxes, lets you claim your state sales tax amount paid as an itemized deduction. No need to hang onto all those receipts. The IRS provides tables for each state with the average state sales tax amounts for various income levels that you can use in your Schedule A claim. But if your locality also collects a sales tax, be sure to fill out the worksheet on the Form 1040 instructions (or let your tax preparer or software do the job), or use the IRS' online sales tax deduction calculator. And definitely don't forget to claim the sales taxes on IRS-specified big purchases, such as a motor vehicle (car, motorcycle, motor home, RV, sport utility vehicle, truck, van or off road vehicle); aircraft or boat; a home (including a mobile home or prefabricated home) or a substantial addition to or major renovation of a home up to the amount of the general sales tax rate; and/or a motor vehicle leased for personal, not business, use. You might want to dig out those item's sales receipts.
10. Earned Income Tax Credit: The Earned Income Tax Credit, referred to as the EITC or sometimes the EIC, is a tax benefit for the working poor. The key word here is earned. You must make money from a job to get this tax credit, but not that much. The credit amount is calculated based on how much you make and the size of your family. But many folks without kids overlook the EITC. While it doesn't pay that much to child-free filers, you could qualify for some EITC benefits. And since it's a credit, it directly cuts what you owe the U.S. Treasury.
11. Casualty and theft losses: Dealing with a disaster is right up there with medical situations atop life's stress-o-meter. But like doctors' bills, some casualty and theft losses might be deductible as itemized expenses. And you don't have to suffer through a major natural disaster to have such a claim. Deductible expenses on your 2017 Schedule A also can come from such unfortunate incidents last year as a car wreck, loss of a financial account bank account due to insolvency of the bank, and uninsured losses from a burglary.
12. Costs related to caring for a parent: If you pay for the care for a parent and mom or dad qualifies as your dependent, you can deduct the parental assistance costs you incur. Costs of in-home care and nursing home care qualify, as do the many medical costs that older folks tend to have. In fact, those doctors' bill could pay off at tax time even if your parent doesn't qualify as a dependent for exemption purposes. You still can deduct mom's or dad's medical expenses on your return as long as you provide more than half of his or her support. And that could be just what you need to meet the deduction threshold cited in the medical costs (#5 above).
13. Credit for the elderly or disabled: If Mom and Dad are doing fine on their own, make sure they know about this tax break. It's available for those 65 or older or who are retired on permanent and total disability and received taxable disability income for the tax year. There are income limits and you (or your tax preparer or tax software) will have to fill out Schedule R. But the work could be worth it, as this tax credit ranges between $3,750 and $7,500.
14. Self-employment deductions: If you file a Schedule C, you'll find many items you can claim to reduce your self-employment income. But there are more directly on the long Form 1040 in the adjustments to income, aka above-the-line deductions, section at the bottom that form's first page. There you can deduct one-half of your self-employment taxes (that's the amount you figured on Schedule SE). You also can deduct 100 percent of the health insurance premiums you paid, as well as contributions you made to Keogh, SEP or SIMPLE retirement plans.
15. Deduct your private mortgage insurance: This is a tax break, like the EITC and Retirement Saver's Credit, that applies only to certain filers. But if you meet the requirements, you can write off the premiums you paid in 2017 on the private mortgage insurance (PMI) premiums your lender made you buy because you didn't put 20 percent down when you bought your house. And, yes once again, you remember correctly; this provision expired at the end of 2016, but like the home energy improvement tax credit and tuition and fees deduction, it was resurrected in January's budget bill for the 2017 tax year.
16. Mortgage refinance points: Home loan rates still are low, but some folks may still pay points to get an even more affordable monthly mortgage. In those cases, you can deduct the points on your tax return for that year of your residential purchase.
17. Foreign tax credit: This is a somewhat obscure, but relatively easy option for many investors with international holdings. Basically, if you paid tax on your holdings to another country, the tax law says you don't have to pay it again on your U.S. return. The amount of foreign tax paid should be on your 1099-DIV. If the total creditable foreign tax amount is $300 or less ($600 or less if married filing a joint return), you can claim the foreign tax credit right on line 48 of Form 1040. If your foreign tax is more than $300/$600, you'll have to fill out Form 1116 to claim the credit.
Some of these deductions, income adjustments and tax credits obviously apply to special filing situations. But that could be your tax circumstance. If so, don't waste the tax-saving opportunity.
Changes coming in 2018: And one final tip. Keep in mind that these tax deductions and tax credits apply to your 2017 tax return, which is due on April 17 this year.
You probably already got that from the many, many references above to 2017. But it's a necessary reminder since this year we've also been talking about tax changes for 2018 under the newly enacted Tax Cuts and Jobs Act (TCJA).
Some of the tax breaks listed here for 2017 returns will change or be eliminated under the TCJA that took effect this year. Those changes, though, are something to worry about once we're through with our 2017 taxes.
For now, here's hoping that at least some of these St. Patrick's Day prompted tax breaks will add to your tax savings pot of gold. Be sure to celebrate with a toast of green beer!
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