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Getting the Most Out of Tax Season

With the tax deadline rapidly approaching (Monday April 18th), most people are likely to fallat one end of the emotional spectrum or the other. For some, like the holiday song says, “It’s the Most Wonderful Time of the Year.” For others, it can be more like, “You’re a Mean One, Mr. Grinch.” But no matter how you feel, there are ways to cut down on the stress while maximizing your return / minimizing your payment. 

Preparing a tax return, even when it’s easy, can be hard. If you’re feeling frustrated, you’re not alone--everyone could use some practical advice on getting the most of the tax season. And while it’s always best to consult with a tax professional, thanks to the helpful folks at U.S. News & World Report, here are 5 ways to take the worry out of tax time while keeping as much money as possible in your pocket (and out of Uncle Sam’s). 

Side Hustle Deductions — If you’re part of the nearly 35% of Americans who have a side hustle, (you know, a side “5 to 9” gig that brings in additional income) then you may qualify for scores of tax deductions. Besides earning extra cash, you can take advantage of additional deductions like vehicle mileage, shipping, advertising website fees, professional publications, business memberships, and more. If you’re paying for your own health and dental insurance, those may be deductible as well. Just make sure you’re not over-deducting, which could raise a red flag.    

Money from Home — If you’re a homeowner and have less than 20% equity in your home, you’re probably paying some type of private mortgage insurance (commonly referred to as ‘PMI’) that you can write off. You can also deduct your mortgage interest, a second mortgage, or home equity line of credit (commonly referred to as a “Heloc”). You can also write off your property taxes and certain home improvements, such as installing a solar power system.  

Home Office — While many were forced to work at home during the Pandemic, there doesn’t seem to be a rush to return to the old in-the-office grind. With 70% of companies planning to adopt a hybrid model, more than 35 million Americans could be working remotely by 2025. If you’re one of those, you might be able to write off your home office. Previously, only self-employed and those who freelanced were able to write off a separate workspace, but with more and more people working from home, changes to the law are allowing even full-time employees who work from home to write off the expenses associated with their workspace. 

Double Duty — You can have your cake and eat it too by combining business travel expenses while you’re on your personal vacation. You might be able to include the airfare and a portion of your hotel bill if you’re spending time on business activities (definitely keep receipts). Back at home, you may be able to rent out your house for business meetings, courtesy of the Augusta exemption that allows homeowners to rent out space in their home for 14 days and not report the income. Just make sure you’re charging a comparable rate for public rental spaces and that your home is not your primary place of business.  

Giving & Learning — You can write off your contributions to legitimate charities, whether it be money or goods, and you can get itemized, official receipts from each organization. If you haven’t been that great at saving the receipts or you donated to charities that didn’t offer receipts, you can always take the standard deduction of $300 for an individual or $600 for married couples filing jointly. For continued education, the American Opportunity Tax Credit (AOTC) allows write offs for qualified college expenses for the first four years of higher education, while the Lifetime Learning Credit (LLC) allows write-offs up to $2,000 per tax year for further education. Learn about the specific qualifications for both programs by comparing the AOTC and LLC.   

Even with all of the above, you might be part of the 90% of taxpayers who just take the standard deduction (instead of itemizing, according to the Tax Foundation). Instead of listing every deduction you might be eligible to take, or if you don’t have that many deductions, a single filer can claim $12,550 in standard deductions, while married couples filing jointly can claim double, $25,100 for tax year 2021. Single individuals with dependents can file as head of household and claim the standard deduction of $18,800.  

Filling with the standard deduction ensures that all taxpayers have some type of income that isn’t taxable by the federal government, but they don’t have to prove it. The standard deduction changes each year based on inflation and can be a faster way for those who don’t have expenses to itemize. Obviously, you can’t claim both ways (standard deduction vs itemized deductions) in the same year, but you can decide which is the better way to get the highest refund (or lowest payment) each year.    

There are other ways to save on your taxes--no matter if you file standard or itemized--just by adding to retirement plans or other types of savings accounts. Besides being able to control how much you want to add to a retirement plan, you can also qualify for a variety of tax breaks. Some retirement plans allow you to defer paying income tax on your retirement savings, while others help you avoid paying tax on any of the investment gains you accrue.  

Another way to reduce your tax bill is by adding to a health savings account (HSA) to pay for qualified medical expenses, including deductibles, copayments, coinsurance, and other health related services. While it’s easy to use an HSA to pay for qualified medical bills, you can only participate in one if you have a High Deductible Health Plan (HDHP), generally a health plan that only covers preventive services before the deductible. For tax year 2021, the minimum deductible is $1,400 for an individual and $2,800 for a family, while the maximum is $3,600 for individual coverage in an HSA and $7,300 for family contributions. 

Lastly and not at all leastly, the absolute best most positive and productive way you can maximize the value of your tax return is by depositing it into your Ando account. By using Ando, you’re empowering that money to fight climate change and have a huge environmental impact. Be sure to include your Ando Direct Deposit (ACH) info on your completed return, and don’t forget to get your return in the mail and postmarked no later than April 18th! 

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