Sunday, January 27, 2013

It's tax time again!

It's about time to start working on taxes!  So I thought I would review my tax strategy with you.  I'm able to save several hundred dollars using this strategy - if you're in a similar situation to me, it could help you as well.

Our situation is that we don't generally have enough tax deductions to itemize each year.  We're in year 11 of a 15 year mortgage, so there is not very much interest to deduct.  (Thank goodness most of our payment is going to principal!)  We don't have a state income tax to deduct.  And we don't have high medical or work deductions, either.

So to save on taxes, I lump expenses into every other year. For instance, in odd years, I make 13 mortgage payments; in even years, I make only 11. I pay my property taxes twice in odd years and not at all in even years. (I don't have the taxes escrowed with my mortgage payment.) I wait until January to give charitable deductions I might in December, and then the next December I give to charities the money I might have given them the next month.

Then, in odd years taxes, I itemize my taxes. In even years (like this 2012 tax year), I take the standard deduction.

For a more in-depth description of this, see this Frugal Follies post Saving Money on Taxes.

To save more, I prepare my own taxes.  I prefer TurboTax. I've used it for years, and I plan to use it again! There is a free edition for the simplest tax returns - check to see if you qualify.

(This post may contain affiliate links. Please see my disclosure policy for more information.)


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