Preparing your own tax returns can be a daunting task, but it can also be a very rewarding experience. Not only will you save money on taxes, but you will also have a better understanding of how the tax system works.
- The best way to save money on taxes is to take advantage of all the available tax deductions and credits. There are many different deductions and credits available, so make sure you research which ones apply to you.
- Some of the most common deductions include mortgage interest, student loan interest, medical expenses, charitable contributions, and state and local taxes.
- Credits are even more valuable than deductions because they provide a dollar-for-dollar reduction in your taxable income. Some of the most popular credits include child tax credit, childcare expenses credit, education credits, and earned income credit.
- When your taxable income is reduced by these deductions and credits you are that much closer to qualifying for a lower tax bracket. The lower the tax bracket you fall into the fewer taxes you will have to pay.
- If possible, try not to earn very much above the poverty level because it may reduce or eliminate your eligibility for deductions and credits. There are some caveats here though because there are many adjustable factors involved in this equation including filing status, age, blind or disabled status, being able to be claimed as a dependent on another person’s return, full-time student status during five months of the year etc…
- So now let us look at how earning too much may not be as bad as it seems and there are ways to adjust. Earning too much can have a negative impact on your tax situation in that it may reduce or eliminate your eligibility for certain deductions and credits. This is often referred to as the “phase-out range.”
- There are, however, ways to adjust your income so that you stay within the phase-out range. One way is to make contributions to retirement accounts such as 401(k) s and IRAs. These contributions will lower your taxable income, and as a result, keep you within the phase-out range.
- Another way to adjust your income is by using a flexible spending account (FSA) for medical expenses. An FSA allows you to deduct your medical expenses from your taxable income, which will keep you within the phase-out range.
The bottom line is that preparing your own tax returns can save you a lot of money on taxes. If you take advantage of all the available deductions and credits, you can significantly reduce your taxable income. And if you stay within the phase-out range, you can keep more of your hard-earned money.
According to Aron Govil there are many different ways to save money on taxes, and the best way to find out how to save money on your specific tax situation is to consult with a tax professional. They will be able to help you find all the deductions and credits that apply to you, and they will also be able to guide you through the tax filing process.
FAQs:
1) Do all taxpayers have to file a federal income tax return?
Yes, unless you did not earn enough money nor had too much withholding. You may be able to avoid filing a tax return if the amount you earned is below your standard deduction and personal exemption amounts. For more information, please see IRS Publication 501.
2) How can I prepare my own taxes?
You can download forms from the IRS website and do it yourself by hand or electronically with a software program. Also, most tax preparation software programs will offer free editions for simple returns that only have the basic deductions and credits such as mortgage interest, property taxes paid etc… If you need additional help then seek out an Enrolled Agent who is an expert in taxation.
3) What does filing season mean?
These are the dates when you can file your tax return, either electronically or on paper. For individual taxpayers living in the US this will be between January and October 15th of that tax year.
4) How do I know if I qualify for free tax returns preparation?
To find out if you are eligible to have your taxes done for free go to irs.gov and search “free e-file”. You should also visit www.irshelp.org to see if you qualify for free services based on your state of residence. If both these resources indicate that you are eligible then it is very likely that any paid preparer would charge a reduced fee because of the IRS Volunteer Income Tax Assistance (VITA) program.
5) How do I find a good tax preparer?
When looking for a tax preparer you should always check their references and reviews. You can also contact the Better Business Bureau (BBB) to see if any complaints have been filed against them. Also, ask your friends and family if they have used a good tax preparer in the past. Finally, don’t be afraid to ask questions about the tax preparer’s experience and qualifications.
Conclusion:
The best way to save money on taxes is by taking advantage of all the available deductions and credits. If you stay within the phase-out range, you can keep more of your hard-earned money. There are many different ways to save money on taxes, and the best way to find out how to save money on your specific tax situation is to consult with a tax professional. They will be able to help you find all the deductions and credits that apply to you, and they will also able to guide you through the tax filing process.
