Invest more money in your retirement account – Your retirement funds actually aren’t taxed until that money is taken out of your retirement account. Contributions to retirement funds can be made as late as April 15th, and the taxable limits for 2011 are $5,000 for an IRA (this does not include catch-up contributions for those 50+) and $16,500 for a 401(k). Not only will you be saving money on your taxes this year, but you’ll be bolstering your retirement fund for the future.
Make charitable donations – Although you can only deduct donations given in the taxable year of 2010, now is the time to pull out those receipts and bank statements. If you haven’t been keeping track of the charitable donations you make in a year, remember to keep your receipts next time, or ask for Tax ID numbers. Not only do monetary charitable donations count: old clothes, books, furniture, appliances, and other odds given to charitable organizations qualify as deductions, too – to the benefit of your community! If you have any property that has appreciated in value from the point you bought it, donating it can let you deduct more than you originally paid. Using a simple tax calculator online can give you an estimation of the impact your donations have on your overall tax refund.
Consider a Roth account – While you don’t get a tax break when you put money into a Roth, the money you invest gets to grow tax-free as long as the account is open. Regardless of rising tax rates in the future, you have a haven to place your money where it can still accumulate growth.
Write off the interest on your student loans – That’s right. If you have qualified loans out for the purpose of pursuing higher education, you can get up to $2,500 in deductions towards paying off the interest on your loans. This type of deduction is not an itemized deduction, but it is used to calculate your AGI.
Casualty and Theft Loss – If you and your family were the victims of a natural disaster, theft, or even a car accident, it’s possible to get up to $100 back per occurrence as long as they are not covered by your insurance. A few examples include the loss of a bank account due to the fault of your bank; fire, flood and storm damage, including hurricanes and tornadoes, and even the replacement cost of trees and shrubs damaged in fires or storms.
There are numerous options to help you optimize your tax returns this year. Make sure you are getting back money wherever you qualify for it, and be mindful of the smartest ways to invest your money for the future.
Olivia Mungal is an award-winning writer with pieces of her work archived in the Library of Congress. With a background in Law, she tackles convoluted economic issues in entertaining and engaging ways.
© 2011, Bruce McFarland. All rights reserved.