Connect with us

Digm Piece (Op-Ed)

5 Reasons to Fall in Love With Filing Your Taxes

Published

on

Photo credit iStock by Getty Images

So now that the Happy New Year smoke has cleared and New Year’s resolutions are settled in, the next big thing that is on everyone’s mind is the love of our life… No, not Valentine’s Day, but those dreaded taxes that we have to file each and every year. For some reason taxes have gotten a bad rap, but truth be told if you knew the secrets, you would fall in love with doing your taxes more than Donald Trump loves hair pieces (they’re not really secrets but it sounded cool to say). Face it, you work hard and meet your obligations all year round, so why shouldn’t you be rewarded for doing what you’re supposed to?

You absolutely should be rewarded! And to help you reap those rewards, check out the following five tips for filing taxes that will help you start to fall in love with the process.

Lovely Tips for Filing Taxes

1) You can use your withholdings to get back more of your paycheck.

If you’re employed full-time, the first thing you should do is check your withholding and increase it, if necessary. When you were hired, you completed an IRS tax form called a W-4 which determines your tax withholding.

Your tax withholding determines how much money is going to be withheld from your paycheck each pay period. Many people do not understand its implications and are likely to choose 0 or 1 which is a number that represents your exemptions.

Option 1. When I first started working, I remember that people would advise me to claim zero so I could get more money back at the end of the year. However, when you claim the least amount of exemptions, more money is withheld from your paycheck for tax purposes. In essence, you’re giving the government an interest free loan on your money that could be used
for your own personal savings.

Option 2. In the reverse, when you claim more exemptions, less money is withheld in taxes. If you take this route, increase your exemptions enough so that you are paying the IRS exactly or close to what you would owe in income tax. The extra money that you will receive in your paycheck should be used for saving in a high-yield savings account, investing, and making your money work for you. This is the better option and what I would recommend.

Be careful that you are not increasing your exemptions just for the sake of increasing them, because if the exemptions are not justified you can wind up owing money, and we definitely don’t want that! Check with your tax accountant before you decide to adjust your withholdings.

2) You can possibly get tax credits and deductions for higher education.

For many Americans, especially millennials, student loans are one of the most concerning things keeping them up late at night. But, most don’t realize that they may be eligible for many deductions that will give them a bigger return come income tax time.

For example, the student loan interest deduction allows you to deduct the amount you paid in student loan interest, up to $2,500 per year. Some other deductions include: the American Opportunity Credit and the Lifetime Learning Credit. Visit IRS.gov for a complete list of deductions.

3) Staying healthy can come with financial kickbacks.

With the rising cost of health insurance these days, it may be tempting to forgo health insurance and take your chances however, not only would that be a big health mistake, but it would also be a big financial mistake due to the penalty charged to those who are uninsured.

One thing that may make you fall in love with taxes is the fact that you can contribute to a Health Savings Account (HSA). In order to pay for those high deductible health insurance plans pre-tax, contributing to an HSA can save you thousands of dollars when you file your taxes. For the 2015 tax filing year, the minimum annual deductible is $1,300 for individual coverage and $2,600 for families and the maximum annual deductible and other out-of-pocket expenses is $6,550 and $13,100 for families.

4) Doing good can be financially rewarding.

There are two universal laws that I live by: 1. “the more you give the more you get” and 2. “to whom much is given, much is required.”

Not only is giving back a noble thing, but it can also help give you substantial
tax savings. If you made donations to a charity, you may be able to use them as deductions on your taxes. To qualify, your donations have to be made to a nonprofit organization that can prove they have 501(c)(3) tax status. Legitimate charities usually have their status clearly stated on their websites, or you can verify it directly from the IRS by visiting http://www.IRS.gov/charities, then click on the tab that says Contributors.

The second criterion is that you must have a receipt from your donations. Not all of your donations count, and there are limits on what can be deducted, so make sure you check with a tax accountant to verify your eligibility. Some common deductions include real estate, furniture, clothing, cars, electronic equipment, office supplies, mileage, cash donations, and tithes paid.

5) Your side hustle can pay your dividends.

We now live in a time where starting a business is not only easier than ever, but it can be done with low overhead, which results in showing a profit earlier on. With many people now taking the leap of faith to become their own bosses, it would behoove you to take advantage of the many associated benefits.

Starting a home-based business can cause two things related to your taxes to happen. First, with your initial investment into the business, it can increase your tax refund. And secondly, you can deduct things like your home office, telephone, Internet service and office supplies. The deductions aren’t anything to sneeze at either. On average, a home-business can bring in around $3,000 to $9,000 in tax savings. The great thing is that it doesn’t matter whether you run your business full-time or part-time—you can still benefit from running a home-business.

Starting to fall in love with the idea of filing your taxes as much as you already love mobile banking? 😉 Just remember that in all things, love is a process!

Disclaimer: All material is for informational purposes only, and is not intended to provide tax, legal or financial advice.  Paradigm Money does not provide tax, legal or financial advice, so you should consult your own tax, legal and financial advisors before making a decision or taking any action.

Ash Exantus aka Ash Cash is one of the nation’s top personal finance experts. Dubbed as the Financial Motivator, he uses a culturally responsive approach in teaching financial literacy. He is the Head of Financial Education at BankMobile and Editor-in-Chief at Paradigm Money. The views and opinions expressed are those of Ash Cash and not the views of BankMobile and/or its affiliates.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Digm Piece (Op-Ed)

Top Ten Freshman Money Myths

Published

on

Photo credit iStock by Getty Images

Starting college is one of the most important and exciting times of your life. Now that you’re all “checked-in,” enjoy your college experience without worrying about where your next meal will come from by chasing away these common freshman money myths. (more…)

Continue Reading

Digm Piece (Op-Ed)

Do What You Love for Free – Here’s Why

Published

on

This is ParadigmMoney.Com, right? So, speaking about a paradigm shift should come as no surprise. In science and philosophy, a paradigm is a distinct set of concepts or thought patterns, including theories, research methods, postulates, and standards for what constitutes legitimate contributions to a field. When speaking about money, most believe it is something you work for and not something that works for you. In all truth, the one percenters understand this concept quite well. In order, to wake up and do what you love, you too must shift your thoughts when it comes to finances.

Doing what you love for free allows you to create freely. You can come up with disruptive, out of this world, never seen before creations that will rock this planet. Take Elon Musk from South Africa, founder of X.com which went on to become PayPal and sold to eBay for 1.5 billion dollars. Musk is also the CEO of SpaceX which designs, manufactures and launches advanced rockets and spacecraft. The company was founded to revolutionize space technology, with the ultimate goal of enabling people to live on other planets. You may say, of course, he can do this, he is a billionaire and co-founder of Tesla.

Not true. PayPal, Tesla, and SpaceX are all products of Musk doing what he loved. As a child, he was an avid reader and taught himself computer programming leading to the creation of X.com. He dropped out of college to start a company with his brother and here’s what he had to say about that PayPal deal… “My proceeds from the PayPal acquisition were $180 million. I put $100 million in SpaceX, $70m in Tesla, and $10m in Solar City. I had to borrow money for rent.” Elon Musk’s current net worth is estimated to be at about $13.3 billion. No bad at all.

The reality of the matter is the less you are attached to money the more money flows to you. Pay more attention to creating things that move the culture forward. Starting at doing what you love with ultimately position you for financial success and happiness.

Continue Reading

Digm Piece (Op-Ed)

How Much Does College Cost?

Published

on

Photo credit iStock by Getty Images

How much does college cost these days? If you’re preparing to go to college and will need to find a way to finance your own education, this is one of the first steps to figure out.  Then you’ll want to find out all of your options and create a plan. Here’s a quick breakdown on the typical cost of college. (more…)

Continue Reading

Trending

Copyright © 2019 PARADIGM.MONEY, All Rights Reserved. PARADIGM.MONEY is owned/operated by BankMobile, a Division of Customers Bank. The opinions/Views expressed on PARADIGM.MONEY are not considered opinions/Views of BankMobile, a Division of Customers Bank.