Tax season is once again upon us. It's something a lot of people dread, but with the right practices, you could stand to get some serious cash back from Uncle Sam.
Below is a checklist of tips on how to get the most out of your taxes this year.
1. If You Get One Thing Right, Make It Your Filing Status
Filing status is important because it can determine how much you pay (or save) in taxes. Also, if you get it wrong, it will likely stick you with a dreaded audit.
Your filing status basically expresses how you wish to be treated by the IRS, and can determine which deductions and credits you are allowed to take, which forms you should fill out and more.
2. Exemptions Are a Quick Way to Lower Your Tax Bill
Did you know that you get a sort of tax discount just for the fact that you are a contributing member of society, that you're married or that you have children? These discounts are called exemptions, and they reduce the income amount you will be taxed on.
3. A $1,000 Credit Equals $1,000 in Savings
Unlike exemptions in the example above, which lower the amount of income you are taxed on, credits directly reduce the amount of taxes you owe. So if you owe $3,000 in taxes, a credit will be subtracted from that. To put it another way, if you receive a $1,000 credit, that means you will pay $1,000 less in taxes. It's sweet and simple-a rarity in the tax code.
4. Itemizing Your Deductions Could Save You Thousands
One big decision you'll have to make is about itemizing, and you have two choices. You could either take the standard deduction or itemize your deductions.
The standard vs. itemized decision is really a question of money and time. For some people, taking the time to itemize could save them hundreds or thousands of dollars in taxes. But if you don't need to itemize, then doing so could take up your time without any financial benefit.
5. Sometimes You Just Need an Accountant
We all love DIY projects. And when it comes to taxes, some people absolutely can do their taxes themselves. But some people need the help of a professional to puzzle through the tax code. That's OK!
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