Did you have to pay taxes instead of getting a refund? You’re not alone, and unfortunately, it could happen again.
But there are things you can do to ease your tax burden, and maybe even end up getting some money back. The key is to start planning now, and not wait until December (which will be here before you know it).
Here’s what you should do:
Donate to Charity and/or Volunteer
This is a great thing to do even without the tax breaks, but the tax write-off is definitely a bonus. Keep careful records of all your donations and volunteer work, as you’ll need that documentation for tax time. Miles traveled on behalf of charity is tax deductible – $0.14 per mile in 2017 – so note the odometer before and after your trip.
Invest in Solar Energy
If your home needs improvements, consider adding solar panels to the list of work. Solar panels can help you save money on your electric bill, and the installation costs are tax deductible.
Contribute to HSA or FSA
A Health Savings Account (HSA) can be used on eligible medical expenses while a Flexible Spending Account (FSA) can be used on medical, child care, and other qualified expenses. HSAs can grow year-to-year, but FSAs typically have a “use it or lose it” policy. Both of these accounts will shrink taxable income though. Contribution limits for Health FSAs are $2,600 for 2017. For HSAs, contribution limits for individuals are $3,400 for 2017. For families, they’re $6,750. Those 55 or older can add an additional $1,000.
Contribute More to Retirement
A 401k or IRA is great for long-term retirement planning, but it has short-term benefits too. Contributions are tax-deductible, and the amount put in those accounts is not included in taxable income.
Claim Education Credits
You can include student loan interest paid and/or tuition as a tax deduction. There are two other options you can look at as well: the American Opportunity Credit, which can cover up to $2,500 annually for four years, and the Lifetime Learning Credit, which can cover up to $2,000 per tax return.
Make Estimated Payments
Finally, sometimes the best defense is a good offense. If you’re concerned you’ll owe taxes again, you can make the blow less intense by making incremental quarterly payments.