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March 31, 2021

Recommendations: With higher taxes possible

Spring is in the air, and though most of us are ready to finally head outside and enjoy the warmer temperatures and budding flowers, spring also means tax season.

Sure, no one loves sitting down to crunch the numbers, and it’s pretty common to get the urge to rush through the process as fast as you can. But taking the extra time to consider the details can save you hundreds or even thousands of dollars. Not sure how to make it happen? Let’s take a look at some of the best strategies to help.

Contribute to Your Retirement Accounts

Funding your retirement accounts can help you in two major ways. Right now, this deductible contribution will help you lower your tax bill. Plus, the money you put in will compound tax-deferred. If you haven’t already funded your IRA, you have until the deadline for tax returns to do so—and don’t forget your 401(k) as well! 

Consider Your Business

If you recently struck out on your own to start a business, you may be in luck. Depending on the structure of your business, you may be able to deduct 20% of your qualifying income before working out your tax bill. This is true for sole proprietors who use Schedule C, as well as pass-through entities.

Itemize Your Deductions

This one may seem like a no-brainer, but many filers opt for the standard deduction simply because it’s easier. However, itemizing your deductions can help you save a great deal of money, especially if you own a home or are self-employed. For 2020, it’s worth it to itemize if your expenses are over the standard deductions of $12,400 for single filers and $24,800 for joint filers.

Jot Down Your Charitable Donations

Charitable donations are an easy thing to forget, especially because many filers don’t realize that they aren’t limited to cash donations! If you’ve donated clothes, food, or household items last year, those things can help lower your tax bill—as long as you stuck around to get a receipt.

Note Your Medical Expenses

If you’ve had costly medical or dental care, or if you visited the hospital last year, keeping those receipts can help you save money on your tax returns. The IRS allows you to deduct qualified medical expenses that add up to more than 7.5% of your adjusted gross income for 2020.  

Planning the details of your taxes is no one’s idea of fun, but taking some extra time to consider every angle can help you score a major windfall when your refund check comes in—or keep you from sending so much money to the IRS in the first place! If you’re looking for even better ways of getting your finances in order, check out some of financial planner Renee Cohen’s extra tips.

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