How do you think the rich got to where they are? Most prosperous entrepreneurs, investors and business professionals can credit their wealth to a long, patient system of saving and investing. And they often hire the best possible attorneys to handle their taxes.
That’s because they know that the secret to earning is saving. So if you want to save more of your hard-earned money and put it toward something useful, follow in their footsteps and start taking advantage of tax deductions and tax credits.
What is a Deduction?
A deduction is way of reducing the amount of your income that’s taxable. That means if you have spent $1,000 on deductable expenses, you can write it off and receive a refund from the federal government. The amount you receive is based on your tax bracket. If, for example, your tax bracket is 28%, you should be eligible to receive 28 cents for every deducted dollar.
…and a Credit?
A credit is much more valuable than a deduction because it’s equivalent to every dollar you paid in taxes. It’s simple: for every dollar you overpaid, you’ll be refunded in full.
You’d be surprised at how many people miss out on these money-saving (or money-earning) opportunities—so don’t be one of them. It’s your money, go and get it back!
10 Deductions and Credits You Can’t Afford to Miss
1. Out-of-pocket Charity: you can write of all the little expenses related to good works. Whether you spent money on art supplies for disabled children, gassed up your car to drive the blind, or donated your furniture to the needy, taking advantage of this deduction is a great way to earn.
2. Job-related Move: If you’ve changed residence to take a new job, any expenses incurred could be deducted. This includes travel expenses, moving costs, fuel, parking fees and tools.
3. Military Travel: National Guardsmen and Military Reservists may receive a deduction for travel to and from drills and meetings. It covers travel, lodging and food expenses.
4. New Vehicle Purchase: If you purchased a new car, truck, motor home or motorcycle after February 16, 2009 (and before the end of the year), you’ll be eligible to receive a refund on the sales tax paid on vehicles up to $49,500.
5. Jury Fees: If your employer paid you wages while you served in jury duty, you will have to hand over your jury pay to that employer. This expense can be written of as jury fees.
6. American Opportunity Credit: This one is for parents of college students. If your child is a college student (applies only to first 4 years of college) you can get a rebate of up to $2,500 for each qualifying child.
7. Work-pay: You can automatically receive a refund for up to 6.2% of your earned income. This refund caps out at $400-800$.
8. Energy-saving Home-improvements: 30% of the expenses you paid to perform energy-saving home-improvements can be returned to you. This includes the costs of certain skylights, windows and outside doors, high- efficiency furnaces, water heaters and central air conditioning.
9. Child Care: Up to $5,000 can be returned to you for expenses accrued to pay for child care throughout the entire tax year.
10. First-time homebuyers: If you bought your first home after November 6, 2009, or you’ve owned a home for 5 to 8 years before purchasing another, you can receive up to $8,000 in returned tax payments
Here are Some Other Valuable Deductions:
• Loan Interest
• Medical/dental expenses
• Union fees
• Miscellaneous expenses (this is the actual title)
• Casualty, theft, and gambling losses (yes, gambling losses)
Remember, saving money truly is earning. In addition to your standard budgeting system, taking advantage of tax credits and deductions is one of the very best ways to gain personal wealth, put your money where it matters, and start living wiser. Getting a return on this money is also a great way to get out of debt, optimize your credit and make some worthy investments.
TIP: For those of you that owe the federal government and don’t receive tax returns. Make sure you file every year and TAKE ADVANTAGE OF AS MANY DEDUCTIONS AND CREDITS AS YOU ARE ELLIGIBLE FOR. This money will help you pay off your federal debt faster.
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