Taxes constitute a significant portion of annual expenses a family has to incur. Plan your taxes carefully to avoid shelling out large amounts of your hard earned income on deductions, which could have been avoided. These tax planning and saving tips can help you manage your taxes better:
A new graduate
A new graduate can save taxes in a number of ways. If you are relocating to a place more than 50 miles from your current location and your relocation amount hasn’t been reimbursed by your employer, you can deduct the cost incurred by you for the trip. You can also deduct travelling expenses taking into consideration 16.5 cents a mile. If you have taken an education loan, the interest paid on the loan can be deducted.
Your first job
The cost you incur while looking for your first job cannot be deducted but cost incurred while changing to a new job including travel expenses, cost for printing resumes etc can be deducted from income for tax calculations. Unfortunately, if you decide to change your line of work or the total costs incurred do not exceed 2% of your total earnings, the amount cannot be claimed as deduction.
Getting married doesn’t necessarily mean that you have to pay more taxes. Couples filing joint returns are eligible for more deductions, credits and a smaller tax rate in comparison to a separate filing.
Birth of your child
As soon as your child is born make sure that you obtain a social security number for the newborn (at the hospital). Claiming your newborn as a dependent will help you save a considerable amount on taxes. You will also get a $1000 child tax credit every year till your kid turns 17.
Buying a new home
You can deduct mortgage interest of up to $1 million when you buy a new home. Local property taxes that you pay each year can also be deducted on a new home. In addition to these, energy credits are also available that can help you save a lot of money on taxes.
Medical bills are deductible but only if the expenses you incur is more than 7.5% of your AGI or adjusted gross income.
Buying a second home
Mortgage interest is deductible on the second loan just as the first. If you rent your home for less than 14 days, you get a 100% tax break.
With some smart planning, you can save a lot of money on taxes. Update yourself regularly with the latest changes in tax rules to make informed decisions.