Tax Tips For The End Of Summer
Tax season is arguably one of the most stressful and dreaded times of the year. While it's still a long way off, there are plenty of steps you can take now to make tax season less of a pain. Many people wait until mid-December to start thinking about the deductions, tax credits, and organizing that they could have done throughout the year to prepare for filing their taxes. But why wait? Summer is actually a great time to get in control and take action to make the next tax season easier on yourself. Here are 7 great ways to get on top of your taxes before the end of the year.
Organize Your Finances And Tax Information
Nothing is more stressful than needing to find a misplaced W-2 the day before taxes are due. Although tax documents won't start arriving until January, you can get a head start on your organization by getting a system in place now. The personal finance blog Cash Money Life suggests using a simple system with pocketed folders or manila folders to organize your personal taxes. Make a folder for your W-2s and other income-related tax documents, as well as one for your deductions and one for expenses. Staying organized ahead of time can be especially helpful if you purchase tax-deductible items for work throughout the year. Keeping all of these receipts in one place will save you a headache later on.
Make Energy-Efficient Upgrades To Your Home
If you plan on making home improvements before the year is over, you may want to opt for energy-efficient upgrades. Not only will this help the environment, it will also give you tax benefits. The Residential Energy Efficient Property Credit allows you to receive a credit of 30 percent of the cost of installing solar water heaters or electric equipment, wind turbines, or fuel cell property. Check IRS publications first to make you’re your energy-efficient plans are eligible under this credit.
Donate Items To Charity
Many people start thinking about donating to charity once December comes along. While the spirit of giving is everywhere as the holidays come up, you get a tax benefit from donating to an IRS qualified charity at any time of the year. Cash donations are easy, but donating items such as your car or household items can help you reduce the amount of stuff filling up your home while helping a good cause. For non-cash donations Money Crashers recommends cataloging the items you plan to donate by recording the number and condition before taking your items to the donation center. Most donation centers will offer a receipt that will work fine for your records, but keeping track of things yourself can be more accurate as long as you're honest about the items' condition.
Learn About College Tuition Tax Credits And Deductions
College classes are starting soon, and if you are a parent of a student or a student yourself, now is a great time to learn more about tax credits for tuition. The Lifetime Learning Credit and the American Opportunity Tax Credit are two credits available to qualifying students. The basic criteria to meet for both credits are that you, your dependent or a third party pays expenses for higher education; the student is taking classes at an eligible institution; and that the eligible student is either you, your spouse, or a dependent listed on your tax return.
Additional rules for eligibility do apply, and you can only claim one of these credits per year. However, you could get a great tax benefit from doing so. For example, according to money-zine.com, The Lifetime Learning Credit allows you to claim a credit of 20 percent of the first $10,000 out-of-pocket tuition expenses. That's a credit of $2,000 for eligible students.
Volunteer Your Time
Volunteering is a great way to contribute your time and skills to improve your community and make life better for others. Sometimes it's necessary to give more than your time by using your personal vehicle to get volunteer work done. In some cases, you can receive a tax deduction for your gas and other travel costs that happen while volunteering. This only applies if the organization you volunteer with does not reimburse you for your expenses. You also can only include mileage and expenses that are directly connected to your volunteer service.
Keep Track Of Your Job Hunting Expenses
Losing a job or being unemployed is rough, but you might be eligible for a tax deduction if you're looking for a new job in your field of employment. According to the Liberty Tax Lounge blog, expenses such as fees to use job searching websites, mailing your resume, traveling out of town for an interview, relocating for a new job, and others can be deductible as long as they add up to 2 percent of your adjusted gross income. Just be sure to carefully track your expenses and keep them organized.
Determine Which Credits You Can Claim As A Parent
Raising kids is expensive, but luckily there are several ways parents can save on their taxes for kids-related expenses. Parents who have a child with special needs may be able to deduct costs associated with special care, evaluations, medical diets, and education if the costs exceed 7.5 percent of the parents' adjusted gross income. Several tax credits are also available, such as the Child Tax Credit, the Adoption Tax Credit, the Child and Dependent Care Tax Credit, and the Earned Income Tax Credit. If you are helping your child pay for college, you may also be eligible for the American Opportunity Tax Credit or the Lifetime Learning Credit mentioned above.
Make A Difference For Yourself And Your Community
There are dozens of ways to prepare for tax season, but starting here is a great way to take control. Taking these steps will require some time and effort, but you will thank yourself when April comes along!
You can also make a difference for kids in your community while getting a tax deduction. Wheels For Wishes accepts car donations year-round to benefit your local chapter of Make-A-Wish. Any donation we receive before 11:59 p.m. on Dec. 31 will give you a deduction for your 2022 taxes! Check out our tax calculator! Donating your car now, rather than waiting, is a great way to get on top of your deductions before it's too late. To make a donation, simply give us a call at 1-855-278-9474 or fill out our online car donation form.