It is tax time again. Some of us will pay and some of us will get a refund. One thing we all will do is try to plan better for next year’s tax season. This year is already sewn up, but next year is anybody’s game. Here are five things that you can consider for your personal taxes for next year.
1. Should I change my allowances? Maybe this year you had to pay taxes. In that case you may have claimed too many allowances on your W-4 form at work. You have a certain amount of allowances that you can take but you are not required to take them. Withholding more than you would normally is one way to avoid the tax man the next time around.
2. Will I sell my home this year? Homeowners get a huge deduction when they sell their primary residence. The government allows them to take a deduction on the capital gains they get from the sale of their residence. For an individual, the amount is limited to $250,000 of the capital gain. For a couple, the amount is doubled. There are stipulations, the biggest of which is that the residence has to have been lived in for two to five years before the sale.
3. Start thinking about next year’s tax credits now. This year you may have qualified for the earned income tax credit. Next year, your kids might be in college. Start thinking about the education credits that are available to parents who make qualifying purchases on educational expenses. There are thousand of dollars in credits that can be claimed.
4. Learn to itemize. Maybe you made charitable contributions last year but it wasn’t enough to reach the threshold limit. Increase those contributions this year. If there are expenses that would qualify you for itemization and a larger deduction on your taxes, do your best to maximize and find other itemized deductions to claim. Be sure to read the fine print and know the requirements for each deduction.
5. Change your filing status. You may be single and have filed as such. But, you are also a parent and that qualifies you to file as Head of Household. What’s the difference? Head of Household gets a larger standard deduction that a single filer. Many people could choose between more than one filing status but don’t compare the benefits and deficits of each. Filing status is a big help to single parents and married or widowed people with children.
Make a change to better your relationship with Uncle Sam in the coming year. These five items are just the tip of the iceberg. They can lead to other benefits you hadn’t thought of in the past. Pan your strategy and reap the rewards.