As the year winds to a close, singles may want to start planning for more than where they’ll spend their next New Year’s bash. It’s commonly believed that all the tax credits go to married folks, but there are some tax tips and credits particular to singles that you should be aware of if you plan to continue your swinging singles life into the New Year.
1) Check your status. If you’re a single parent, you may qualify for head-of-household status. This will give you much better tax rates than filing single. Sometimes even a married person with a dependent child can qualify for head-of-household rates, which beat the rates for those who are married-filing-separately. Not sure if you qualify? If you need help, don’t be afraid to visit a qualified tax preparer or tax professional to find out.
2) Check your adjustments. Sometimes singles think that because they don’t itemize their tax return that they can’t take deductions. It turns out that there are certain deductions that are allowed whether or not you itemize your tax return. These include IRS and certain pension contributions, moving expenses, medical savings accounts, and student loan interest. If you’re self-employed, you can also take a health insurance deduction and a deduction for half of the self-employment taxes you pay.
3) Take the exemption you’re owed! One of the biggest mistakes that single filers make is not taking a tax exemption for themselves on their W-4. Even if you’re single and have no children, you can still take an exemption for yourself. If you don’t, your employer will hold MORE taxes than you actually owe from each paycheck. Sure, that means you have a great refund coming in April. But do you really want to give the government an interest-free loan until then?
4) Job expenses may be deductible. Let’s face it, it’s rough out there, and looking for work – especially if you’re single – can feel like a full-time job. The good news is that many job-seeking expenses are tax deductible, including travel and transit expenses, employment agency fees, phone calls, and any money you spent for the creation, typing, printing, and mailing copies of your resume to potential employers.
5) Open a retirement account. Singles tend to put off saving for retirement longer than couples and married folks. If you aren’t already contributing to your company’s 401(k), open an Individual Retirement Account (IRA), and start saving now in the amount up to the limit of the tax deduction you can take (this varies based on your age). Contributing to an IRA or 401(k) is also a great way to decrease your taxable income. If you’re single, the contribution you make to your IRA if your work doesn’t offer an option – up to $4,000 if you’re under 50 – is also fully tax deductible. Rules are less clear-cut if you contribute to an employer-sponsored plan. Check with your local tax expert or preparer if you have questions.
This entry was posted on Monday, November 16th, 2009 at 9:10 AM and is filed under Franchising, Tax News. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
