Tax season is here. Although the April 15 deadline is still far off, W-2s should be done rolling in and filing is on many American’s minds. Some people love it, and see it as a time for some much-needed quick cash on their return. Others, especially business owners and the self-employed dread tax season, and wait with crossed fingers hoping that they’ve set enough aside before Uncle Sam comes for his pound of flesh.
There are a few things you can do to save money this tax season, whether that means keeping it in your pocket or getting it back in your refund.
The first thing that Americans should consider when filing their taxes is to cut out the middleman. While in the past, it was necessary for many to go to an accountant or tax specialist with their W-2s and various other forms, today, with countless online services available, all you need is an Internet connection and capable device. Using an online tax preparation service could save an individual both time and money.
According to NerdWallet, the best services for individuals to use are H&R Block, TurboTax, and TaxAct. If you earned $66,000 or less in 2018, the good news is that you qualify for the IRS Free File program. This Free File program is available across a number of different tax preparation services including TaxAct and H&R Block.
For individuals more experienced with filing, the age-old question of taking the standard or itemized approach comes into play as well. With the amount of the standard deduction increasing under the Tax Cuts and Jobs Act this year, tax filers may consider a strategy known as “Bunching,” in which you plan on filing an itemized return one year, and taking the standard return the next. The standard deduction has increased from $6,500 to $12,000 for individuals who are filing, $9,550 to $18,000 for those heads of households filing, and $13,000 to $24,000 for joint-filing married couples. With this in mind, for many Americans who would have filed with an itemized deduction in the past, taking the standard would now make more sense. However, by adopting the bunching strategy, in which you time your applicable deductions, you may be able to save money on a year-by-year basis.
“Doubling the charitable contributions in one year plus other itemized deductions may allow a person to be over the standard deduction and itemize every other year,” said Ken Moraif, CFP and senior advisor at Money Matters.
While it’s a more hands on approach to optimizing your return during tax season, bunching can save you substantial money in the long run. It may be too late to adopt this strategy for your 2018 taxes, but you can easily strategize for next year.
With more Americans than ever working from home, or on a remote-in office split, it’s also important to keep the home office deduction in mind when filing your taxes. While this is often thought to only apply to business owners who operate out of their homes, it also can be applicable to remote workers. The only important stipulation to keep in mind is that the space must be used exclusively for professional work.