Debt is a form of financial burden that most people are faced with throughout the year. But the end of the year usually brings a bit of relief for most people through tax returns. If you file for your taxes correctly you could get some of the money you put out in interest returned to you. There are many ways you can take advantage of certain things you owe money on as you file for your taxes. Most deductions are reflected through the interest you paid on your debt, many will have a big impact on either the taxes you owe, or the amount you will get in your tax return.
However, not all debts that collect interest will provide a return in your taxes, nor a reduction. Things such as credit card debt, for example, will not apply in your returns. Allow me to explain in more depth how you can use money owed to get more money in return through filing them on your taxes.
Students who owe money on a loan they were granted for college will receive up to $2,500 in deductions if they are qualified. This is pleasant for those of you that have been paying increased interest rates on your payments through the school year.
Tuition Fee Deductions
For those of you that are still attending school, you will be able to deduct up to $4,000 for any educational expenses you may have been faced with throughout the year. These expenses include, housing, supplies, books, materials etc. It is important to hang onto your receipts for all of your expenses throughout the year, in order to maximize your tax refund so you can further save money at tax time.
Deductions on Mortgage interest rates
This is the most popularly claimed deduction, as it has the highest pay out. A homeowner can deduct interest on up to 1,000,000 dollars of debt on mortgages, as long as you meet the requirements for a qualifying home owner. If you would like to figure out how much to expect to receive from interest on your mortgage you can use a tax calculator found online. This is a great way to save money at tax time.
Interest on Home Equity
If you have made home improvements you could also benefit from large deductions. Up to $100,000 of loan money can have interest deducted for your homes equity. There are some rules however, you can’t just spend money on your home and expect to get it back come tax season. Any money spent has to increase your home’s value. To better understand the rules and find out if you qualify, you can find the details on the IRS’s website.
If you own your own business then you might be relieved that you can get some of your business expenses back. Many business expenses qualify for deductions which will help you save money at tax time. However, there are some hold ups, such as, distinguishing between current costs and capitalized costs. You can find a whole guide of deductable business expenses at taxreceipts.com. Doing this correctly will save you money at tax time.
Deductions from your Charitable Actions
If you have unused items lying around the house that are still in good condition, you may wish to give them to charity. You can use these items to receive a tax deduction, therefore, returning some of the original cost of the unused item to you, saving you money at tax time. Make sure you don’t lose your receipts for each item and estimate the worth when you can to insure you will get the deduction amount you are hoping to achieve before you give away your stuff.
Bad Debt Deductions
Have you given money away to a family member, friend or even business partner and know they cannot repay you? If so you could qualify for the bad debt deduction. In order to qualify for this deduction, however, you must first prove that you took a financial hit and will not be receiving a return of the money, nor do you plan on it. Keep in mind that this is merely a deduction and you will not be reimbursed of any money you lent out.
As I mentioned before, credit card debt does not apply in any way to deductions. If you do somehow receive a deduction from any consumer debt you might have, remember that moment because this is a very, very, rare occasion.
A great way to save money at tax time is to use your tax return as a way to pay off debts that have the highest interest rates. Many people are tempted to go out and treat themselves to shopping. But receiving a tax return is a great opportunity to clear up any debt you may have accumulated. By starting with the highest interest debt you might have you will start to cut down on your monthly payments, this is a great way to save money at tax time.