Did you not get as much money back from your tax return as you had wished? Our friends at Levo League share some tips on how you can score big for next year and get some more money in the bank.
Here's how the old tax return tale usually unfolds: Your palms are sweaty in anticipation over how much money you'll get back this year. All sorts of numbers are going through your head (as well as things you could buy from J.Crew's new spring collection). And then, womp-womp — it's . . . good . . . but not cute-new-strappy-sandals good. And then, precisely when you can't do anything about it, your accountant (or your mom) proceeds to tell you all the receipts you could've kept and other things you could've done to get back more money. So, instead, we're pointing out four big life things to pay attention to this year, that way April 2016 brings you your best tax refund yet:
1. You get a new job and/or relocate to a new city
Soon-to-be college grads, take note! "If your total miscellaneous itemized deductions, including job-hunting expenses, exceed two percent of your adjusted gross income, you can deduct those expenses," says Mark Jaeger, Director of Tax Development at TaxACT. Jaeger adds that moving expenses (flights, schlepping personal belongings) due to relocating for your job may qualify you for a deduction — if the distance and time meet certain qualifications. (Consult with a tax professional to evaluate your particular situation.)
2. You went freelance (or started your own business)
First, "make sure to set up a Solo 401K (SEP or IRA) and contribute to it," says Vincenzo Villamena, a managing partner of the CPA firm Online Taxman. Villamena adds that business-owners and free-agents often forget the tiniest of business expenses that can add up over the year. Remember to include shipping expenses (even stamps), third-party processing fees like PayPal, and your cell phone bill if you use it to make business phone calls. Most importantly, if you work from home, you can speak to your accountant about counting rent and utility fees toward your business expenses.
Related: Boost Your Confidence in 20 Minutes
3. You make a consistent effort to contribute to your retirement account (despite a small paycheck)
If you end up earning $30,500 or less in 2015 ($61,000 if you're married and filing jointly) and contributed to an IRA or employer-sponsored retirement plan, you may be rewarded with the Saver's Credit. The credit amount, determined by your income and filing status, can offset up to $2,000 of your contributions ($4,000 if married filing jointly). Jaeger recommends maxing out your IRA contributions. "For tax year 2015, traditional IRA contributions up to $5,500 are tax-deductible." He adds that the same contribution limits apply to Roth IRAs as long as your 2015 modified adjusted gross income is below $116,000 ($183,000 for joint filers). Incomes above that are subject to a reduced deduction.
4. You have loads of student debt to pay off
Even if you don't itemize deductions, you can deduct up to $2,500 in required and voluntary interest paid on college loans. Jaeger calls out the American Opportunity Credit and the Lifetime Learning Credit. The American Opportunity Credit is as much as $2,500 (with up to $1,000 of it refundable) for college tuition and fees paid for each student in your household. As for the Lifetime Learning Credit, Jaeger says this can help pay for tuition and expenses paid for undergraduate, graduate, and professional education — up to $2,000 to be exact. Note that you'll have to choose between the two. "You can claim the Lifetime Learning Credit or the American Opportunity Credit for one student, but not both in the same tax year. And while Form 1098-T Tuition Statement will include a lot of your tuition and fees, it may not include all expenses eligible for this credit," he says.
Get in the habit of record-keeping now, and please do share the wealth. Let's educate our friends, family and co-working circles, encouraging the women (and men) in our lives to take charge of their financial future.
Check out more from Levo League:
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- 3 Must Haves For a Successful #Ask4More Negotiation
- 10 Ways to Stay Motivated During Your First Job (When There's No End in Sight)