Saving Money
Taxes: Save Money, Solve Problems
Medical Expenses - You can generally only deduct medical expenses that exceed 7.5%
of your adjusted gross income. But if you had significant medical expenses, you
may reach that threshold faster than you think. Don’t forget to include costs such
as mileage spent going to doctor appointments, therapy or to fill prescriptions;
treatments ordered by your doctor such as massages or those for weight loss; dentures,
crutches, canes, hearing aids, eyeglasses or contact lenses; fees paid to a nursing
home for medical care; health insurance premiums paid out of taxed income (different
from the deduction available to those who are self-employed). You may also be able
to deduct health insurance premiums if you are self-employed.
Child Care Expenses - If you paid someone to care for a child or a dependent so
you could work, you may be able to reduce your federal income tax by claiming the
credit for child and dependent care expenses on your tax return, according to the
IRS. This credit is available to people who, in order to work or to look for work,
have to pay for child care services for dependents under age 13. The credit is also
available if you paid for care of a spouse or a dependent of any age who is physically
or mentally incapable of self-care. For more details, visit www.IRS.gov.
You may be able to take a tax credit of up to $10,160 for qualifying expenses paid
to adopt an eligible child (including a child with special needs). The adoption
credit is an amount subtracted from your tax liability. The credit and exclusion
for qualifying adoption expenses are each subject to a dollar limit and an income
limit.
Other Expenses - You may not have thought about deducting some of these expenses,
but they are worth checking out. They include gambling expenses (can’t exceed winnings),
tax preparation fees, safety deposit fees if used for business or investment purposes,
legal fees paid to collect (taxable) alimony, worthless stocks or securities, alimony
you paid, casualty or theft losses not reimbursed by insurance.
Important: Because tax laws change frequently, check with a tax advisor before attempting
to take any of these deductions. Also remember that some expenses will be deductible
only if they exceed a certain percentage of your income.
Don’t Lend to Uncle Sam
Getting a fat tax refund each year may be better than owing the IRS, but it may
not be the smartest way to save. After all, it represents an interest-free loan
to the IRS. And you’ll have to wait to get that money back! According to the IRS:
• Federal tax refunds to individuals totaled more than $202 billion last year.
• Nearly 100 million taxpayers got refunds (3 out of 4 returns).
• The average refund was slightly more than $2,000.
Use the Withholding Calculator on the IRS website (www.IRS. gov) or talk with your
tax professional about adjusting your withholding so you’ll get more money in your
paycheck now.
Then put that money to work for yourself by paying down highinterest
rate debt or creating an emergency savings fund. It’s your money!
