Tax Return Day 2016: There’s Still Time to Count Up Your Deductions
Estimated reading time: 2 minute 30 seconds
Don’t stress over taxes. Even though April 15 is getting closer, there are still things you can do to make filing your tax return easier. Better yet, you have time to open an IRA (three extra days—until April 18, 2016) or to take advantage of other deductions that can shave dollars off what you may owe Uncle Sam.
Gather and organize your paperwork related to your:
- Income: W2 forms from your employer, 1099s related to other income, receipts for income, like rent.
- Payments made: Forms 1098 for mortgage interest statements or student loan interest payments, for example.
- Health care: Form 1095 if you received a subsidy for your health care insurance.
- Interest or dividends: These are from saving accounts or investments.
- Estimated tax payments you have made already.
- Investments: the price you paid or received for any stocks or funds bought or sold.
Contribute to your retirement accounts:
- You have until April 18, 2016 to contribute up to $5,500 to a Traditional or Roth IRA if you are 49 or younger; $6,500 if you are 50 or older in 2015. Read the complete list of contribution limits
- If eligible for a deduction, your Traditional IRA contribution will immediately reduce the amount of tax you owe; Roth contributions are not deductible (but your distributions will be later on).
- Over time, as you continue to contribute and the value of the assets in the IRA increases, you will continue to reap the tax benefits and build a good foundation for your retirement.
You’ll certainly want to itemize your deductions. If your:
- Deductible expenses exceed the standard deduction amounts
- Examples of deductible expenses: State taxes and local taxes, medical expenses that amount to more than 10% of their adjusted gross income, mortgage interest, charitable contributions and others.
- Additional expenses you need to consider are tax preparation, job related expenses, and professional dues.
If you are a sole proprietor, expenses that are business related may be used to reduce your net business income: advertisement, travel, food and lodging, uniforms etc.
You also might want to consider additional line item deductions, if you:
- Made an HSA contribution
- As a business made an employer plan contribution
- Are a teacher and had educator expenses
- Moving expenses due to a job relocation
- Student loan interest
- Made a deductible Traditional IRA contribution
- Paid self-employment tax
There may also be credits to offset the tax that you owe which include but are not limited to:
- Foreign Tax Credit
- Child Tax Credit
- Education Credit
- Retirement Savings Contribution Credit
- Residential Energy Credit
Take notes and keep records:
- Once your return is filed, be sure to keep copies (paper or scanned versions) of all the supporting documents used to prepare the return.
- Keep notes about how you arrived at the numbers used in case questions come up.
And one last tip: If you have any doubts about your return, talk with a trained tax professional. Tax season may never be your favorite time of year, but if you follow these tips, it can be less difficult—this year and next year.
For more information, please visit our Entrust Learning Center and utilize our many resources to help you stay on track with your investments.