Money Matters Tax Tips: Filing for 2017 and How to Improve 2016 Taxes Before the Deadline
Tax season is a stressful time for many. Leading up to April 15th — the traditional deadline for filing a tax return — millions of Americans wonder whether they’ll receive a refund or end up owing the IRS, and how much money they’ll receive or need to pay.
For many, the tax return is not set in stone. Did you know there are still ways to improve 2016 taxes before the filing deadline passes. And, there are also some easy measures for improving your 2017 taxes. Let’s start with what you can do to improve your 2016 tax situation.
Improving 2016 Taxes
Contributing to a Traditional IRA can improve your 2016 tax return. Those under 50 can contribute as much as $5,500 a year to a traditional IRA. Those 50 and over can deposit up to $6,500 a year. As RothIRA.com explains, “With a traditional IRA, you avoid taxes when you put the money in. With a Roth IRA, you avoid taxes when you take it out in retirement.” If you have not made your IRA contribution for 2016, you have until April 18th, 2017 to do so.
Another way to improve your 2016 tax return is placing money in a health savings account (HSA). As with a traditional IRA, you can deposit funds in an HSA prior to the 2016 tax deadline, and have the deposits count as deductions for 2016. Like traditional IRA deposits, HSA deposits are tax-free.
Improving 2017 Taxes
After your 2016 taxes are squared away, it’s time to look at how you can improve taxes in 2017. Below are three options.
First, pay expenses that offer tax benefits before the new year arrives. For example, if you make a January 2018 mortgage payment by December 31, 2017, interest from the payment will contribute to your mortgage interest rate deduction for 2017. Early payments for property taxes and medical treatment can also count as deductions at tax time.
Second, increase income tax withholdings for the year. This is one of the simplest ways to reduce what you owe or boost your return. How much to withhold depends on your income, financial obligations, and future plans.
Third, consult with a tax professional regarding tax credits. Each year, new credits are unveiled, but many only learn of them by consulting an accountant. You may pay for the consultation, but it can be money well spent. As TurboTax notes, “Credits work better than deductions as refund boosters. For each credit dollar, your taxes go down a dollar.”
Contact Us Today
It’s not too late to improve your 2016 tax situation, and American Eagle Credit Union is here to help. By making tax-free deposits in our traditional IRA and/or HSA before the tax deadline, you may increase your deductions.
To explore your account options, please call us today at 800-325-9905, or send us an email through our contact form. We look forward to helping you at tax time!