Last week, I wrote about how one may want to think about how much you have already paid in taxes this year while there was still some time to make things matter before filing season. This week, I wanted to mention a couple deductions that one could still take advantage of, and they even come with positive benefits before it comes time to fill out those tax forms.
So as always, be aware of the benefit of making a charitable donation.
I wrote much in recent months about how natural disasters laid waste to multiple areas. The visions of the destruction may now have faded from the minds of many, but the struggle for those most severely affected continues. We are also entering the time of year when giving becomes a bigger theme, opening up more avenues for us to share with others. One can complain about the fact that you are already hearing Christmas music in the grocery store, but this time of year does come with positives, as well, such as the beauty of a giving spirit.
Beyond the tax benefit, there is the good feeling that we all get by helping. Studies show that even those who can barely afford to give feel better about donating their money than spending it in other ways. There is power in knowing that we have the ability to make a positive difference in the lives of others.
Also for those of more limited means is the retirement savings contributions credit for low- to mid-income workers. This can come with up to a 50 percent credit for the first $2,000 one contributes to a retirement plan, such as a traditional or Roth IRA, 401(k), 403 (b), or similar workplace retirement programs.
In fact, with an IRA, one even gets until the filing date (April 17, 2018) to make contributions to the plan and still have it count.
Overall, this isn’t a deduction that is simple, as it varies depending on the taxpayer, and can’t be claimed by everyone. The basic rule, however, states that it can be claimed in 2017 by married couples filing jointly with incomes up to $62,000; heads of households with incomes up to $46,500; and single or married individuals filing separately with incomes up to $31,000. In addition, one needs to be 18 or older, not a full-time student, and not claimed as a dependent on another person’s return.
So sure, it’s not an easy checkbox, and one must even fill out another form (8880) to properly qualify for the credit. But if you can lower your tax bill, and improve your future financial picture, this can’t possibly be a bad thing, right?
And the IRS reported that in tax year 2015, saver’s credits totaled nearly $1.4 billion for that season. When enough people make those seemingly smaller moves, it starts to add up. Just like if you start to make the moves that you can now before it comes time to file your taxes, it will start to add up and really make a difference.
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