Running around at the last minute to get ready for taxes could mean you loose out on important deductions. Just like anything, preparation allows you to check every opportunity and gather important documents while taking advantage of money saving strategies. Take a look at these suggestions for tax preparation for 2016 to help you get ready and think about new and valuable deductions.
Get your receipts and other paperwork organized
When tax season starts, you don’t want to be frantically looking for that receipt from the summer of 2015. Get rid of the anxiety of the season by getting organized now. Get all of your receipts, tax payment stubs, and contribution statements together and organized by date. Check your latest brokerage statement for gains or loses. Make checklists of all 1099s that you may have. Collect your medical receipts, business expenses, job search costs, and charitable donations together. This is the time to compare your 2014 taxes to your new 2015 taxes and see if you have any new deductions or missed deductions from the year before.
Did you have any life changes in the past year?
Each life event can affect your taxes in different ways. Now is the time to figure out what those benefits or changes might be. Did you get married? Did you have a child? Did you get a new home or job? All of these questions have different results for your taxes.
Check out your potential tax deductions
Tax deductions lower your taxable income, so its important to know which deductions you are eligible for. Consider making an extra mortgage payment or prepay your state or real estate taxes. You may also opt to have dental work done or elective surgery before the end of the year as this counts as a deduction. Remember to contact your accountant for your state specific deductions or to help you understand what you qualify for.
Find out what tax credits you could be eligible for
Tax credits are not the same thing as tax deductions. Tax credits can directly reduce the dollar amount you owe the IRS. If you owe the IRS $1,000 after completing the worksheet, but you get $500 in tax credits, you will only have to pay $500 to the IRS. This ‘discount’ means a lot, so see if you qualify.
Donate to charity now
Make your donations before the end of the calendar year. Make sure the institution you donate to is a qualified organization that has a 501c3 status. Remember to always get a receipt. To have your donations count as deductions, they must exceed a $500 value.
If possible increase your retirement plan contribution for the last remaining month
Your retirement plan contribution is a deduction from your taxable income. If you contribute a larger amount it will decrease the taxable income. Just remember to reduce the contribution for the following year.
Do you have any tips on preparing taxes? Leave us a post or tell us your story.