2. Take itemized deductions
Itemized deductions can help taxpayers lower their annual income tax bill and can exceed what they could receive from a standard deduction. Unfortunately, most people don’t take itemized deductions to avoid the hassle of coming up with evidence for their year-round purchases.
However, if you’ve had to pay for mortgage interest, property taxes, medical expenses, local and state taxes or made donations, it’s really a pity not to itemize your deductions and reduce your taxable income.
Just to have an idea of what pays off more, you can use the IRS interactive tax assistant to find out your standard deduction. Based on that figure, you can then decide which deduction yields a greater financial benefit – the standard deduction or the itemized deductions.
Make sure you also find out more about these 10 Oddball Tax Deductions You Won’t Believe Are Real.
3. Enroll in College
Another way to save on taxes and benefit from deductions or credits is to enroll in college. If you take online classes or go back to school in your community, you can become eligible for several credits and write-offs, courtesy of the US government.
As an eligible student, you are offered two education tax credits to choose from: the American Opportunity Tax Credit which covers up to $2,500 of the cost of tuition, fees and course materials paid during the taxable year. The other one is the Lifetime Learning Credit, which covers up to $2,000 of the cost of tuition, fees and course materials.
Another important thing to take into account is that grants and scholarships are not considered taxable income, as long as you use the money to pay for tuition, fees, supplies and other school-related items.