6 Tax-Saving Tips for Families

It is estimated that each year, American families are overpaying income taxes by around $400 because of missing the many tax saving tips for families. It is important to be aware of how the tax laws change to be certain that you are receiving all of the tax benefits that are allowed. Below are a few family tax benefits to take advantage of each year.

1. Withholding

While it is tempting to treat a tax refund as a windfall, it is actually more like an interest-free loan to the government. The goal should be to break even rather than receive a large refund each year. Check with a tax professional about how to leverage this aspect in the best way.

2. Child Tax Credits

Child tax credits are available for up to $1,000 for each qualifying child who is under 17 years of age. To qualify, the child needs to be claimed as a dependent by the taxpayer. There is no limit on how many children may be claimed, as long as they reach the criteria specified.

3. State and Local Tax Credits

People who reside in states that do not have local income tax may deduct the sales tax paid from federal tax returns. If state and local taxes are paid, it is possible to deduct whichever amount is greater: either the amount of tax paid or the amount of sales tax paid.

4. Donations

Deduct charitable donations for the value of items or cash paid to any 501C-3 non-profit organization or church. Save receipts for donations in excess of $75 for services or goods and for over $250 when no goods are received.

5. Real Estate and Stock Losses

One of the benefits of home ownership is that the mortgage interest is deductible. By refinancing, you can also be eligible for loan cost deductions. Stock losses that exceed gains can also be used to offset ordinary income and reduce the amount of taxe owed.

6. Retirement Fund Credits

Make tax-deductible contributions to Individual Retirement Accounts. Check with the IRS for the maximum IRA contribution, which can change annually.

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