Last Minute Tax Saving Tips

It's possible to contribute to an individual retirement account any time prior to the April filing deadline. In fact, this is perhaps the only account an individual can open after the New Year and still claim on the prior year's federal income tax form.

For example, if Lindsey decided she wanted to fund an IRA in 2020, she still has until the April 2021 filing deadline to open that account and claim this on her 2020 tax return.

Keep in mind that Roth IRA contributions are not tax deductible; however, Traditional IRA contributions may be deductible depending on the filer's modified adjusted gross income, and whether or not they're already covered by an employer's pension plan.

In recent years, the child and education tax credits have been more generous. That means additional tax-savings opportunities for parents of children; especially those with dependents attending a college or university.

Even if a taxpayer doesn't own a business, they may still be able to deduct certain business-related expenses if they purchased something for their job and were not reimbursed by an employer. For example, job related travel is deductible on an income tax return. Receipts will be needed as proof of these expenses.

Individuals that work for more than one employer in any tax year, and have earnings in excess of $137,700 in 2020 and $142,800 in 2021, may have paid too much Social Security tax. Individuals can claim a refund on Form 1040 when they file their personal income tax return with the Internal Revenue Service.

Tax deductible charitable donations can be in other forms besides check or cash. When donating a car, clothing, shoes, furniture, or other items of value to a recognized charity, detailed records and receipts will be needed as proof for a deduction. The mileage driven for charity is also tax deductible. Back in 2007, the recordkeeping rules for gifts to charity were made more stringent; it's important to know all of the applicable requirements before taking a deduction.

Finally, here is a tax deduction checklist, which summarizes the types of savings a filer should be looking for when preparing their return:

• Penalties for early withdrawal of savings

• Alimony paid

• Student loan interest

• Prescription eyeglasses, contacts, and hearing aids

• Crutches, canes, and orthopedic shoes

• Medical transportation costs

• Cost of alcohol or drug abuse treatments

• Charitable contributions

• Local and state income taxes

• Personal property taxes or real estate taxes

• Points paid for a mortgage or refinancing a home

• Unreimbursed employee business expenses

• Mileage and other expenses associated with volunteer work

• Casualty and theft losses

• Tax preparation software and fees

Note: Some of the above items can be taken as miscellaneous itemized deductions and as such are deductible to the extent they exceed 2% of the filer's AGI. In the case of medical and dental expenses, they are deductible to the extent they exceed 7.5% of the filer's AGI.