6 Secret Ways to Get a Tax Break This Year, According to Experts
THESE SURPRISINGLY SIMPLE TIPS COULD HELP YOU SAVE MONEY WHEN IT COMES TIME TO FILE.
The annual process of filing your taxes never seems to get any easier over time. Besides having to be sure to include all the required information when you submit everything to the Internal Revenue Service (IRS), changes in your employment, family life, or even residence can make it difficult to know exactly how much you're going to owe—and how to avoid an audit. But if you're hoping to secure a bit of a refund, it never hurts to know exactly what you can write off . Read on for the secret ways to get a tax break this year, according to experts.
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Consider deducting state sales taxes.
Even though everyone in the country is required to file their taxes each year, the tax rate we pay at the register during each transaction differs from state to state. On the federal level, that means writing off your state sales taxes can be a worthwhile deduction depending on where you live.
"This write-off is especially helpful for the states who do not have an income tax, such as Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming, since you have to choose between writing off state and local income or sales taxes," Moira Corcoran, a certified public accountant (CPA) and top tax expert on JustAnswer, tells Best Life. "For most people living in income-taxable states, the income tax deduction makes the most sense."
Open a health savings account.
Shutterstock / Vitalii Vodolazskyi
Depending on the type of health insurance you have, there's a decent chance that you might have already signed yourself up for a health savings account, which allows you to put away untaxed money you can use to pay for certain medical expenses. If you're currently enrolled in a High Deductible Health Plan (HDHP), experts say there's still time to reap the benefits of establishing one.
"If you are eligible for an HSA, you can make contributions all the way through April 18 this year," says Robert Farrington, founder of The College Investor. "By contributing to an HSA, you can deduct $3,650 for individuals or $7,300 for families."
And there could even be some benefits for people with accounts already set up. "You're allowed to 'top-up' as well. So even if you contributed a little last year, you could top up to the full amount before the tax deadline," Farrington explains.
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Look at your charitable contributions.
Besides supporting a worthwhile good cause, giving money to a charity is one of the most notable ways to help your bottom line when calculating what you owe the IRS. But even though this is a well-known statute, experts say there's more to it than just what you've paid out.
"Most people are familiar with taking the charitable contribution deduction for cash donations," says Corcoran. "You are also able to deduct out-of-pocket costs incurred while doing work for a charity such as supplies you bought for your work or miles driven—which is 14 cents per mile."
Remember your side work or extra jobs.
Whether you've been lucky enough to turn a hobby into a cash cow or are simply picking up extra work to make some extra money, having more than one source of income can make it easier to keep your bank account full. Just remember that when it comes time to file your taxes, that could mean more work-related items you could potentially write off.
"If you had a side hustle in 2022, don't forget that you can deduct your business-related expenses," advises Farrington. "So, if you earned $5,000 side hustling, you might not owe as much in taxes as you think because you only pay taxes on your net profit. And if you had mileage expenses because you drove a car, had to buy supplies, or even used your cell phone, you could deduct expenses that you incurred in making your side hustle money. This can save you in taxes!"
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Calculate your gambling losses.
iStock / sanjeri
The sudden thrill of winning big at the casino can be vaporized just as quickly when your luck starts to turn in the other direction. But if you're folding and walking away from the table down for the year, you still might be able to use it to your advantage by writing down your gambling losses as a deduction when you file your taxes, Corcoran says.
However, there's an important caveat: "This deduction is only available if you itemize, and it is limited to the amount of gambling winnings you report as taxable income," she points out.
Don't forget military deductions.
Some tax breaks are well known because of how many members of the general public they could potentially apply to. But if you're enlisted in the armed forces, there's a different set of deductions available to you that experts say you may not be aware of.
"Members of national guard or military reserves may write off the cost of travel for drills or meetings," says Corcoran. "You must travel more than 100 miles and be away for the night. You can deduct the cost of lodging, 50 percent of meals, and mileage."
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.