Personal Finance

Slash your tax bill and maximize your savings this spring

Key Points
  • You can squirrel away up to $6,750 in a health savings account if you have a family insurance plan.
  • Have a kid? Take a credit of up to $1,050 on child and dependent care expenses.
  • Remember, a slate of itemized deductions is on the way out.
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Procrastinators, rejoice: You still have time to cut your 2017 tax bill.

We're officially in the middle of tax season. Filers have until April 17 to submit their returns and pay Uncle Sam. The IRS predicts that it will receive more than 155 million returns this year.

More than 7 in 10 taxpayers are expected to scoop up refunds this year, according to the agency.

If you're holding off on sending your return, here's an incentive to get moving: You only have a few weeks to implement these tax-savings tactics.

"The strategies for reducing your tax bill for 2017 revolve around claiming all of the deductions and tax credits you legally deserve," said certified public accountant Debbie J. Freeman, director of financial planning at Peak Financial Advisors in Denver.

"Focus your attention on three separate items: deductions for adjusted gross income, tax credits and itemized deductions," she said.

Here are a few savings opportunities that are worth another look, according to Freeman.

Above the line

These breaks are best because they're accessible to everyone, regardless of whether they itemize.

Health savings account: If you're eligible, make a tax-deductible contribution to your HSA by April 17.

HSAs have a triple-tax benefit: Contributions are either tax deductible or pretax, savings grow on a tax-free basis and users can make tax-free withdrawals for qualified medical costs.

You can save up to $6,750 in this account if your family is covered in a high-deductible health plan. Contribution limits for self-only coverage is capped at $3,400.

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IRA: You can put away up to $5,500 a year in your IRA ($6,500 if you're over 50) and snag a deduction, provided you meet certain income requirements.

Single filers with a modified adjusted gross income of up to $62,000 ($99,000 for married filing jointly) may deduct up to the amount of their contribution limit. Beyond those thresholds, filers with a MAGI of up to $72,000 if single ($119,000 if married) may collect a partial deduction.

SEP IRA: Put away as much as $54,000 into your SEP IRA if you run your own business. Be aware that the amount you can deduct for your own SEP IRA contribution will vary based on your net earnings. You have until April 17 — Oct. 15 if you file an extension — to make a contribution and have it count for 2017.

Here’s why that tax refund might not be a good thing

Insurance premiums: If you're an entrepreneur, you may be eligible to deduct premiums for health and dental insurance coverage. This is known as the self-employed health insurance deduction.

Student loan deduction: If you've paid at least $600 in interest on a qualified student loan, you may be eligible to deduct up to $2,500. Be aware that this break is subject to limits: It begins to phase out for single filers with modified adjusted gross income over $65,000 ($135,000 for married filing jointly).

Moving costs: If you moved, you may be able to deduct these expenses, provided you pass a three-part test.

  • Your move must relate to the start of work.
  • Your new workplace must be at least 50 miles farther away from your old home compared with the distance between your old job and old dwelling.
  • Finally, if you're an employee, you must work full time for at least 39 weeks during the first 12 months after your arrival. Self-employed individuals must meet this time test, and they must work full time for at least 78 weeks during the first 24 months after arriving at their new location.

Tax credits

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Child and dependent care costs: This break is designed to help working parents with child-care costs. This credit can be worth up to $1,050 for one child under age 13 or $2,100 for two kids under 13.

Saver's credit: If you stashed up to $2,000 into an IRA or a 401(k), you may receive a credit of up to 50 percent of your contribution. Joint filers with adjusted gross income over $62,000 can't grab this break, and neither can single filers whose AGI exceeds $31,000. You have until April 17 to make a contribution and have it count for 2017.

Educational credits: If you have a child in college, consider the American opportunity tax credit, which offers a maximum annual credit of $2,500 per eligible student. There's also the lifetime learning credit worth up to $2,000 per tax return.

There's also the deduction for qualified tuition costs, which Congress revived for 2017: You may be able to deduct tuition, books and supplies for your studies by up to $4,000.

Itemized deductions

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Medical: Gather your receipts, including info on long-term care insurance premiums paid. You may be able to deduct medical costs to the extent they exceed 7.5 percent of your adjusted gross income.

"Don't forget medical miles driven," said Freeman. "You'll need documentation of it."

The medical rate is 17 cents per mile.

Charity: You'd probably remember making a large donation of cash or appreciated stock, but don't forget to count your noncash items. Goodwill and the Salvation Army offer guides that will help you place a value on donated goods.

Donors also often overlook miles they drove to serve charitable organizations: When calculating your deduction, consider the rate of 14 cents per mile.

Prospective home buyers looking at a new home for sale.
Matthew Staver | Bloomberg | Getty Images

New home: You already know that mortgage interest and mortgage insurance premiums are deductible. If you bought a house in 2017, bring your closing statements when you meet with your accountant, said Freeman. You may be able to deduct mortgage points or prepaid interest, plus origination fees.

Last call for miscellaneous itemized deductions: This is the last year you can deduct such items as tax prep fees, investment management fees and unreimbursed employee expenses.

The Tax Cuts and Jobs Act did away with these tax breaks, starting in 2018. "If you think you can get to the threshold to itemize, take everything you're legally allowed to take because they're going away," said Freeman.

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