Save with health savings accounts
Putting money in a Health Savings Account (HSA) is deductible, even if you do not itemize deductions. Michael Dinich from YourMoneyMatters says, “The funds in an HSA grow tax deferred like an IRA or 401(k)…After age 65, funds can be used just like an IRA or 401(k).”
Home office and business deductions
People who work from home or run a business at home can deduct home office expenses such as rent, utilities, and real estate taxes. Deborah Sweeney from MyCorporation.com explains, “According to the IRS, this means a space designated as your home office that is used regularly and extensively for conducting business.”
Self-employed people can deduct car trips for work, including errands and meetings. Julie Ramhold from DealNews says, “You can deduct (the mileage) any time you use your car for work-related trips…” Independent workers, gig workers, or small business owners may save taxes and protect assets by incorporating. In the report by Cheapism, Deborah Sweeney explains, “With the new tax laws, these businesses could stand to save 20 percent…less a deduction of up to 20 percent to bring the rate lower.”
Education and student loan benefits
Spending money on higher education, including courses to improve job skills, may qualify for the Lifetime Learning Credit worth up to $2,000 per year. Interest paid on student loans is deductible up to $2,500. As stated in the report by Cheapism, Nate Matherson from LendEDU.com says, “Your student loan servicer will provide you with a 1098-E statement…collect from each of your servicers.”
Child and elder tax credits
Parents can claim children as dependents to get exemptions and credits, like the Child Tax Credit or a $500 nonrefundable credit. The IRS says criteria include the child’s age, relationship, support, citizenship, and residence. Parents paying for childcare for children under 13 can get a credit for up to 35% of the expenses, up to $3,000 for one child or $6,000 for two or more. Even children over 13 or other dependents who cannot care for themselves may qualify. According to the report by Cheapism, Josh Zimmelman from Westwood Tax & Consulting says this credit can still be claimed for the part of the year the child was under 13.Elderly parents living with you may be claimed as dependents if you provide more than half of their support. Dane Dickler from EisnerAmper says, “Most people only think of kids, but it can also be a parent.” You can get a $500 nonrefundable credit for qualifying parents.
Green energy and car tax credits
Installing solar panels or solar hot water systems in your home can give a 30% tax credit. Michael Dinich explains, “Unless the rules get changed … starting in 2019 the credit will be reduced a few percent each year.” Buying a plug-in or hybrid car may qualify for a $2,500 to $7,500 tax credit depending on the car’s size and battery.
Job search and state tax savings
If you lose your job and are looking for a similar one, some job search expenses over 2% of your income can be deducted. Nate Matherson says, “Depending on your length of unemployment, it might be easier than you think…you can get a deduction for all the hard work.”
Moving to a state that does not tax income may reduce your taxes. As per the report by Cheapism, Tommy Sullivan from Retirement Living says, “Seven states do not tax individual income: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.”
Home buying and moving deductions
Buying a house lets you deduct mortgage interest and some property taxes, but the new law limits total state and property tax deductions to $10,000. Jeff Miller from AE Home Group says, “Buying a house is a great idea…research your state’s income and property tax liability.” Moving for a new job may let you deduct expenses like U-Haul rentals or storage fees if the move meets IRS distance rules.
Charity and donation benefits
Donations to charity are deductible, but only if you keep records of what you gave. Melinda Kibler from Palisades Hudson Financial Group says, “Many people don’t keep records throughout the year. Missing many small donations can be costly.”
If you want to give large donations in the future, opening a donor-advised fund lets you preload donations and get current tax deductions. Dane Dickler says, “If you’re giving $5,000 a year…you can take several years of donations and preload a donor-advised fund and get a current deduction.” Donating appreciated stocks, bonds, or funds directly to charity gives a deduction while avoiding capital-gains tax.
Alimony and Kiddie tax rules
Alimony paid for divorces finalized before 2019 is tax deductible. Alimony received is no longer taxable. Putting income-earning savings in children’s names is limited by the Kiddie Tax. For 2018, first $1,050 is tax-free, next $1,050 taxed at child’s rate, remaining taxed at trust rates up to 37%. Kiddie Tax applies until age 19, or 24 if a full-time student.
File taxes for free
Filing taxes for free is possible for people earning $66,000 or less. IRS-trained volunteers help prepare and submit tax returns. Kat Tretina from Student Loan Hero says, “You can skip paying hundreds for tax preparation.”
FAQs
Q1. How can I save money on my taxes this year?
You can save taxes by contributing to retirement accounts, HSAs, claiming dependents, home office deductions, education credits, green energy or car credits, and other IRS-approved deductions.
Q2. Can I deduct childcare or elder care expenses on my taxes?
as a Reliable and Trusted News SourceYes, parents can claim childcare credits for kids under 13, and you can claim elderly parents as dependents if you provide more than half of their support.
