Important tax tips everyone should know?

[jeffrey]

What, in your opinion, are the tax tips that everyone should know in order to save the most when doing their taxes each year? What tax tip saves you the most money?

[feh]

I can provide one tip - if your deductions in an "average" year are insufficient to itemize, bunch deductions that can be itemized (ie. property taxes and charitable donations) every-other year, so you can itemize 50% of the time.

[BMEPhDinCO]

Keep your papers and know what you should be getting ahead of time (ie 1098, 1099, etc) so you don't have to amend a filing if you forgot something.

[ActYourWage]

I can provide one tip - if your deductions in an "average" year are insufficient to itemize, bunch deductions that can be itemized (ie. property taxes and charitable donations) every-other year, so you can itemize 50% of the time.

Hi, could you explain this a bit more, I'm interested on how this works. Thanks.

[scfr]

Hi, could you explain this a bit more, I'm interested on how this works. Thanks.

Hope you don't mind my jumping in even though I'm not the person you asked.

Here are a couple examples.

Charitable donations; Let's say you typically donate $500 every December. To "bunch" your donations instead of giving $500 in Dec '13 and another $500 in Dec '14, you would give $500 Jan '14 and another $500 in Dec '14. You'd end up giving the same amount but have 0 deductions in 2013 and $1,000 in 2014.

Property Taxes: Similar to the donation scenario, if your property taxes are due in January, you would pay your 2014 taxes at the "normal" time in January, but then pay your 2015 taxes early, in December 2014. Thus, you'd "bunch" your deduction in the tax year 2014, the same tax year you bunched your charitable donations. IMPORTANT CAVEAT: Call your taxing authority first to make sure they will allow this. Not every county allows it. The county where I used to live did not allow it. When I called to inquire I was told that even if I paid early they would not receipt it as paid until the due date, and so I would not be allowed to bunch my property taxes.

[ActYourWage]

Hope you don't mind my jumping in even though I'm not the person you asked.

Here are a couple examples.

Charitable donations; Let's say you typically donate $500 every December. To "bunch" your donations instead of giving $500 in Dec '13 and another $500 in Dec '14, you would give $500 Jan '14 and another $500 in Dec '14. You'd end up giving the same amount but have 0 deductions in 2013 and $1,000 in 2014.

Property Taxes: Similar to the donation scenario, if your property taxes are due in January, you would pay your 2014 taxes at the "normal" time in January, but then pay your 2015 taxes early, in December 2014. Thus, you'd "bunch" your deduction in the tax year 2014, the same tax year you bunched your charitable donations. IMPORTANT CAVEAT: Call your taxing authority first to make sure they will allow this. Not every county allows it. The county where I used to live did not allow it. When I called to inquire I was told that even if I paid early they would not receipt it as paid until the due date, and so I would not be allowed to bunch my property taxes.

Don't mind a bit. Thanks for that explanation, that is interesting to know.

[Jerry91]

You should remain updated about the tax deductions. Apart from this, you should also take advantage of tax credits. Moreover, you should invest your money wisely.

[feh]

Don't mind a bit. Thanks for that explanation, that is interesting to know.

I'll expand the example a little further to show concrete advantages of doing this (completely making up numbers here):

Let's say your prop taxes are $8000 and the standard deduction is $10000. If you claim them every year, you'll always take the standard deduction, instead of itemizing. If you bunch them, one year your deductions will be $0 (so you'll take the standard deduction) and the other they'll be $16K, and you can itemize.

Total deductions over 2 year span by bunching: $26K
Total deductions over 2 years if not bunching: $20K

[Mr Nice Guy]

Vehicle ownership tax on your car's registration.....Can be significant depending on your vehicle.

[scfr]

As far as Jeffrey's original question, the thing that saves us the most (or at the very least defers taxes and is hoped/expected to save us) is maximizing contributions to tax-deferred retirement accounts.