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| Tax Saving Tips |
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 Tax season is here again. Everyone would love to avoid paying a hefty amount of money in taxes, don't you? But how? If you are interested in finding out ways on how you can lower your tax bill, read these smart tax saving tips. By keeping these things in mind, not only will you be able lower your tax bill, but it will also help ensure that you will get the maximum tax refund due to you. Here are some helpful tips: Take Advantage of Tax Credits Donate to charity Contribute to your IRA and other retirement plans Include Medical Expenses File Your Tax Returns on Time 1. Take Advantage of Tax Credits Tax credits can increase a refund or reduce a tax bill. Usually, credits can only lower a tax liability to zero. But some credits, such as Earned Income Tax Credit (EITC), child tax credit, Recovery Rebate Credit and first-time homebuyer credit, are refundable. Therefore, they can make the difference between a balance due and a refund. Although some credits are available to people at all income levels, others have income restrictions. These include the EITC, Recovery Rebate Credit, saver's credit, first-time homebuyer credit, education credits and child tax credit. Generally, if you qualify for a credit, you can claim it whether or not you itemize you deductions. For more information click here or contact the Internal Revenue Service. 2. Donate to charity Charitable donations are usually 100% deductible. However, in order for your donation to be tax deductible, it should meet these requirements:
It is advisable to keep a record of your contribution of cash, check, or other monetary gifts, either a bank record or a written communication from the charitable organization, which includes the date and amount of the contribution as well as the name of the organization for documentation purposes. Click here for more information. 3. Contribute to your IRA and other retirement plans. Contributing to your Traditional IRA account can reduce your taxable income, as it is tax deductible. However, you have to meet the contribution deadline in order to qualify, which is usually April 15. Please note that you can only take a full deduction if neither you nor your spouse was covered for any part of the year by an employer retirement plan. These are the dollar limits for IRA contributions for tax years 2009 and 2010:
If you have an employer-sponsored retirement fund, make your contribution to save money on your income taxes. Doing this will lower your income tax as your employer will already deduct your contribution from your gross pay, therefore the basis for your income tax will be lower. To get more details on this type of deduction, please read IRS Publication 590 4. Include Medical Expenses Itemizing your deduction on Form 1040, Schedule A, may allow you to deduct your medical and dental expenses. This includes expenses you paid for medical and dental care for yourself, your spouse, and your dependents. Medical expenses include insurance premiums paid for accident and health or qualified long-term care insurance. However, you may not deduct insurance premiums paid by an employer–sponsored health insurance plan unless the premiums are included in Box 1 of your Form W-2. Please note that you can deduct only the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income. For more information, refer to IRS Publication 502 , Medical and Dental Expenses. 5. File Your Tax Returns on Time Don’t forget, April 15 is the tax deadline for Individual Tax Returns. Be sure to send in your tax returns by then to avoid any penalties. If you think you won't be able to meet this deadline, it is important to file for an extension. However, keep in mind that extensions are granted depending on your situation. It will be wise to consult your accountant or call the Internal Revenue Service for more information. Please note that these are only for informational purposes. Please be sure to consult your tax advisor or financial planner for help and advise when preparing your tax returns. If you are a senior and need help in preparing your taxes, read Tax Preparation Tips For Seniors, to get important tax tips that will help make your tax preparation easy and simple. Copyright © 2008-2010 La Dolce Living, Inc. All Rights Reserved.
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