While they typically do not receive as much media attention, middle-class families have access to multiple deductions and tax breaks that can help lighten the load during tax season. If you are a part of this "middle of the road" population, this blog post is for you. Keep reading to learn about the different deduction possibilities that may be most advantageous and accessible to your family, courtesy of our local bank at the Lake of the Ozarks.
1. Mortgage Interest
Buying a house is not only an integral part of the American dream - it can also be a helpful way to reduce your total tax bill. In most cases, homeowners can deduct all of the mortgage interest they pay for their primary residences as well as for their second homes. You may also be able to deduct the interest on a home equity loan.
2. Retirement Savings
Traditional IRAs, SEP accounts, and 401(k) plans offer valuable tax break opportunities. The funds that you contribute to a traditional IRA or SEP is tax-deductible. The money that you contribute to a 401(k) is not included in your tax income, thus lowering the total amount of earnings that you must pay taxes on.
3. Savers' Tax Credit
Saving for retirement offers another advantage - if you contribute up to $2,000 to your retirement plan in a given year (or $4,000 if you married filing jointly), you may be eligible for a credit that is a certain percentage of your total contributions (depending on your income). Almost all types of qualified retirement savings plans qualify for the savers' tax credit.
4. Charity
Donating to charity is another great way to lower your tax bill at the end of the year. Providing that you do not exceed the limits, the money that you donate to qualifying non-profit organizations - those with official 501(c3) status - may be taken out of your taxable income.
5. Children
Claiming children as dependents on your tax return may lower your total tax bill by as much as $1,000 per child. In order to qualify, children must be under the age of 17, American citizens, and officially under your guardianship. They must also have earned no more than 50% of their own financial support throughout the year. Your household income must meet certain requirements as well.
6. Childcare
Childcare is a huge financial burden for many families, but it does offer a unique benefit - you may be able to deduct your childcare expenses for children that lived with you for at least six months out of the year.
7. College Education
Parents paying for their children's college tuition may be able to receive the American Opportunity credit up to a dollar amount of $10,000. Eligible students may also be able to receive an education credit (the Lifetime Learning credit) up to $2,000. Finally, you may be able to deduct up to $2,500 of student loan interest if you meet income requirements.
It's Not Too To Start Preparing!
Though tax season is not until April, it's never too soon to begin preparing for the next tax season. By taking time to familiarize yourself with these different tax breaks now, you can evaluate which ones make sense for you financially. Talk to a certified public accountant to learn more about these (and other) tax breaks and how they may be applicable to your situation. As you move forward with your year, you can make plans to take advantage of the tax break opportunities that will be a good fit for your family.
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First Bank of the Lake - Striving For Excellence
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Located at the entrance to the Osage Beach Premium Outlets!
4558 Osage Beach Parkway
Suite 100
Osage Beach, MO 65065
4558 Osage Beach Parkway
Suite 100
Osage Beach, MO 65065
(573) 348-2265
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