Tax Season is Here

Tax Season Is Here….

My apologies for the long absence RF readers. Being deployed to multiple locations and not having the best internet service has hindered my writing. Also the bad guys we fight everyday out on the range has kept me mighty busy. I can see the end of the tunnel and I shall be returning home in due time. Are you ready? January is usually not the time when people think about their taxes but I would advise on planning ahead of time so we can maximize our tax return.

Don’t be that person who end up scrambling last minute to get all paperwork intact and filing 2016’s taxes in the final day of April 18. If you are younger, filing taxes should be very simple since it only requires filing a W-2 or 1040-Z and calling it a day. When you’re a bit older, it can be a little bit more complicated since you may have a wife, kids, mortgage payment, investments, retirement contributions, and charity donations.

I fall somewhere in between since I don’t have kids or a mortgage payment. I have gathered my top 5 tips on what I have done for years in maximizing my tax refund. This can be applied if your either a civilian or a military member but please be aware that not all can be used depending on your current situation in life.
1. Maximize your retirement contribution:  Most people overlook this little gem all year until the final numbers are in. For military members, the maximum amount is $18,000 annually (traditional and Roth combined) and $54,000 annually when deployed. Civilian contribution limits under 50 for Traditional and Roth IRA is 5,500 annually respectively. Remember, Roth is not pre-taxed meaning the benefit to investing pre-tax money (traditional) is that it has the potential to lower your current tax bracket, and your money can grow tax-free until you withdraw it.

The RF way of doing things is if possible max out traditional first for maximum tax benefit and then contribute the rest to Roth. I just find that I get more money back when I contribute the traditional way (I tried both) and the question you should ask yourself and why in the heck would you want to give the government guaranteed money now? They may have a change of heart down the road and with Roth, your money is gone. You just never know.
2. Contribute to your favorite charity during the year:  CFC is the way to go when you’re serving in the Air Force and civilians can contribute to pretty much any charities you choose. Save your receipt!
3. Got kids? Each one gives you a $1000 credit:  This is not an invitation to have more kid though.
4. School deductions:  Paying off a student loan? You should get a tax break for the interest.
5. File Jointly:  Married couple should file jointly 99% of the time for maximum efficiency. There is always an exception to the rule but for the most part I always find that it pays to team up with your spouse!
January really is the start of something exciting. Why not start with preparing your taxes now and getting the maximum amount of money that the government has been using interest free all year? It pays to plan ahead. Oh and when you do get your tax return, please don’t spend it all on electronics or shiny things.