Preparing for Tax Season

It’s hard to believe but the end of the year will be here soon. A New Year means tax season is right
around the corner. If you haven’t made a decision on how you’ll prepare your taxes this year, here are a few tips that may push you toward a DIY approach.

Shop around for software
TurboTax (www.turbotax.com) is generally the most popular and trusted tax software option, but you’ll typically have to pay around $60.00 per year. I used TurboTax for many years and was very happy with it. However, it may be worth your time to shop around for some free options. Many tax prep software applications are free up to a certain income threshold, and your costs will also vary depending on the sources of your income. A person with a single W-2 form will usually pay less than a person with multiple W-2s, 1099s, investment income, and other income sources.

Take advantage of homeownership
If you’re reading this blog, there’s a good chance you’re a homeowner. Tax time is one of those events that show the benefits of homeownership because you can get some major tax deductions. So, whether you’re doing your taxes yourself or getting help from a professional, it’s important to take advantage of those breaks! Two of the biggest deductions are:

•  Mortgage Interest Deduction: Before buying a home, a standard deduction may have made the most sense when you prepared your taxes. But homeowners can deduct the interest portion of their mortgage payments, and the earlier you are in your mortgage, the greater the percentage of each payment that goes toward interest, so take advantage right away!

•  Home Office: There are specific criteria that have to be met in order to deduct home office expenses, but it can lead to a very large deduction. In general, your home office has to be used specifically for business purposes. Check with a tax professional to see if your home office qualifies for a deduction—it’s a little extra work, but can make a big difference in your tax responsibility.

Mortgage interest, property taxes, and some home buying costs are among the deductions you may be eligible for. Your tax preparation software should guide you through these deductions.

DIY is great, but so is a tax professional
DIY tax preparation isn’t for everyone. Though tax software companies offer audit assistance for an extra fee, some people enjoy the peace of mind that comes with meeting a tax professional and being able to ask questions about your taxes in person.

A tax professional is particularly helpful if your taxes recently became more complicated. For example- if you started a business or completed several real estate transactions.