five Ways to Rescue Money on Your Taxes

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Source:   —  April 02, 2016, at 8:34 AM

Do you know everything you necessity to know to potentially rescue money on your taxes? Here’s a quiz I came up with: one. TRUE OR FALSE: If you itemize, for every hundred dollars in tax deductions you can claim, you'll rescue the dollar quantity of your tax bracket.

five Ways to Rescue Money on Your Taxes

Tax day is coming up, quick and furious. Do you know everything you necessity to know to potentially rescue money on your taxes? Here’s a quiz I came up with:

one. TRUE OR FALSE: If you itemize, for every hundred dollars in tax deductions you can claim, you'll rescue the dollar quantity of your tax bracket.

TRUE! Declare you’re in the twenty-five % tax bracket. For every hundred dollars' worth of deductions you can claim, you'll rescue on your taxes! I learned this from a small-town accountant years ago and it’s such a concrete way of looking at it that it’s grand motivation to draw those receipts together and attempt to reduce your taxes as much as you can.

two. TRUE OR FALSE: Somebody over fifty who's the exact same income, expenses — and everything else — as somebody under fifty could legally pay less in taxes.

TRUE! Many of us can reduce the quantity of income we're taxed on by contributing to an IRA or 401k retirement plan. But people over fifty can create what're called “Catch up contributions.” For two thousand fifteen, the government will authorize them to sock far up to $three.000 ADDITIONAL in an IRA and up to $6.000 additional in a 401k — on TOP of the normal contributions younger people are allowed to make. The deadline is April fifteenth, two thousand fifteen, same day as your taxes.

3. TRUE OR FALSE: Tax deductions are better than tax credits.

FALSE! Tax credits reduce your real tax bill dollar for dollar, whereas tax deductions just reduce your taxable income. Congress seems to be adding new tax credits all the time, so be sure to check whether there are any that apply to you. Examples:

•Hybrid car •Energy efficiency improvements to your house, love insulation or an Energy Star furnace. •Child and baby care tax credits. •Education tax credits.

four. TRUE OR FALSE: You might wish to separate from your spouse at tax time.

TRUE! No, I’m not saying you should obtain a divorce to dodge taxes! But some people CAN lower their taxes by choosing the “married filing separately” option instead of filing jointly. Filing separately gives each spouse a lower adjusted gross income, which can authorize you to more easily meet thresholds that give you tax breaks for things love medical expenses, work look for costs and business expenses. If you or your accountant uses a computer program to do your taxes, it’s beautiful simple to compute them both ways and look which will rescue you the most.

five. TRUE OR FALSE: If you file for an extension, you can wait to pay your taxes until Oct. fifteen.

FALSE! This is a myth — and a risky one. When you file for an extension, you STILL have to pay your estimated tax bill by April fifteen. You just obtain to keep off the paperwork for six months. And a footnote: if you can’t afford to pay, you should STILL file your taxes (or file for an extension) by April fifteen. That’s because if you file but don’t pay, your penalty is only half a percent. But if you don’t file OR pay, your penalty is five percent!

Elisabeth Leamy is a 20-year consumer advocate for programs such as "Excellent Morning America" and "The Dr. Oz Show." She's the author of Rescue LARGE and The Savvy Consumer. Elisabeth is also a professional speaker, delivering talks nationwide on saving money, media relations, and career success. Elisabeth receives her best legend tips from readers, so please share your ideas with her via Facebook, Twitter or her website.

Any opinions expressed in this column are solely those of the author.

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