Taxes are part of almost everything we do in life. There are, however, ways to save on your taxes through life’s transitions.
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Here are 12 tax tips to help you save through major life events.
- Deduct your tuition. Education expenses may be tax deductible if they maintain or improve skills required in your employment.
- Invest in a 529 plan to save for your children’s education. You won’t get a tax deduction, but there won’t be a tax on the earnings and growth of those funds if they are used for education.
- Tally the cost of books and necessary supplies purchased for your education. Expenses directly related to your college education may be tax-deductible and may put more money back in your pocket.
The Working World
- Invest in 401(k)s and IRAs as soon as possible. Small contributions growing from an early age are more valuable than large contributions made years later.
- Learn about your company’s fringe benefits, such as tuition assistance plans, free employee counseling, mass transit commuting assistance, Health Savings Accounts, and other tax-free perks.
- Get next year’s refund now by adjusting your withholding so that you break even with the IRS at the end of the year. If you need help saving, have money automatically deposited to savings from each paycheck.
- Only borrow from your 401(k) in an emergency. The interest you pay on the loan won’t be tax deductible, and you will lose the capital appreciation you’d enjoy if you’d left it invested in the plan.
- Put tax-free money into your employer’s dependent care plan. Though this will reduce your child and dependent care credit, it’s still a good financial move for most taxpayers.
- Claim the Child Tax Credit on your taxes. Beginning with your 2021 taxes (the taxes you file in 2022), the age limit and the amount of the credit increased, and it is fully refundable – meaning you’ll be eligible for the benefits even if you don’t owe taxes. It is an additional credit you may get of up to $3,600 for each qualifying child under 6 or up to $3,000 for each qualifying child aged 6 to 17. TurboTax will ask you questions about your dependents and give you the deductions and credits related to your dependents that you’re eligible for.
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- Gather your receipts for dependent care. You may be able to claim the Child and Dependent Care Credit even if you don’t work, if your spouse works, and if you are a full-time student or disabled. Don’t overlook expenses eligible for the child and dependent care credit such as nursery school, after-school programs, and daycare.
- File jointly. Married couples filing separately are barred from many tax deductions and credits, so unless you are trying to distance yourself from a tax-evading spouse or a soon-to-be-ex, a joint tax return is your best move. TurboTax helps you select the filing status that you are eligible for based on your entries.
- Take advantage of the Other Dependent Credit for non-child dependents. If you take care of a non-child dependent like a parent, grandparent, or even a friend, you may be able to claim the new Other Dependent Credit which is $500 per eligible dependent.
Don’t worry about knowing all of these tax rules. TurboTax will ask you simple questions about yourself and give you the tax deductions and credits you are eligible for based on your entries. If you have questions, you can connect live via one-way video to a TurboTax Live tax expert to get help along the way, or you can be matched to a dedicated tax expert with experience in your unique tax situation. TurboTax Live tax experts are available in English and Spanish year-round.