Taxes: Exciting or depressing?

Financial EducationJohn Perdue
Jan 26 2016

For many people, tax season is an exciting time of year. If you’re anticipating a large tax refund, it’s like the big payoff after a year of hard work. But for those that won’t be receiving a refund, tax season can be down-right depressing.

Whichever category you fall in, though, preparing your taxes can be equally stressful. It may be too late this year, but moving forward, make a plan to stay organized throughout the year in order to reduce tax time stress. Start a tax file and keep good records as you go, instead of trying to compile all your tax information at one time. Track your income and expenses, and always write down tax deductible expenses immediately, otherwise you may forget about them. Not sure what information to keep? Follow the general rule of the five W’s for all your expenses. Who, what, when, where, and why?

People worry about taking deductions on their taxes because they are afraid it will lead to an audit. But if you keep good records and check your return carefully you have nothing to worry about. In fact, you may be overpaying your taxes in a sense, because you’re overlooking some valuable tax deductions.

 

Commonly Overlooked Deductions:

  • Charitable Contributions —Cash donations to a charity aren’t the only donations eligible for a tax break. You may also be able to deduct the value of material items you donate, such as clothing or furniture. Just make sure you ask for a receipt when you drop off your donations!
  • Moving Expenses—You may be able to deduct moving expenses if you moved at least 50 miles from your old home, either for your current job or a new one. Don’t forget to include costs such as mileage spent going to doctor appointments, therapy, or to fill prescriptions, treatments ordered by your doctor such as massages, those for weight loss, dentures, crutches, canes, hearing aids, eyeglasses or contact lenses, fees paid to a nursing home for medical care, and health insurance premiums paid out of taxed income (different from the deduction available to those who are self-employed). You may also be able to deduct health insurance premiums if you are self employed.
  • Child Care Expenses—According to the IRS, the credit for child and dependent care expenses is available to people who, in order to work or to look for work, have to pay for child care services for dependents under age 13.

 

These, and other deductions can make a huge difference in your tax return. Just remember that some expenses will be deductible only if they exceed a certain percentage of your income.  

 

 

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