After the holidays, I find myself floating happily along in the flush of celebration, and then—boom. The first 1099 form arrives in the mail. Reality bites. I'm going to have to do my income tax return.
The earlier you get to it, the sooner you get rid of the stress. Here are some tips to get you going, with some help from the experts at H&R Block.
1. People 65 and up get a larger standard deduction. Using it might save you more money than if you itemized deductions (it's easier, too). Check it out.
2. You might qualify for the saver's credit if you're working and contributing to a tax-favored retirement plan such as a 401(k) or IRA. You can cut your tax by 10 percent of your contribution if you're married with an adjusted gross income between $40,001 and $61,500, or single with adjusted gross income between $20,001 and $30,750. The credit gradually rises to 50 percent for people with more limited incomes. There's a $1,000 cap per person.
3. The fine for not having health insurance jumped to the larger of $695 per person (capped at $2,085 for a family) or 2.5 percent of household income (with the cap linked to prices of Bronze plans on the marketplace). That compares with $325 and 2 percent of income last year. That might be more than you would pay for insurance, if you qualify for subsidies.
4. If you’re at least 65, live mainly on Social Security, and have very little additional income, you may not have to file a tax return at all.
5. Even if you're not required to file, do so if you're eligible for the earned income tax credit. The EITC goes to working people with low to moderate incomes, including income from self-employment or part-time work. If the credit exceeds the amount of tax you owe, you'll get a check from the government for the difference.
6. Long-term care expenses (nursing home, qualified home care, premiums on LTC insurance) are deductible to the extent that they exceed 7.5 percent of your adjusted gross income (10 percent if you and your spouse are both under 65). Expenses for assisted living facilities might be deductible, too, if you're chronically ill.
7. You owe taxes on your Social Security benefit if your "combined" income exceeds a certain amount. Combined income equals your adjusted gross income plus any nontaxable income such as municipal bond interest, minus half of your Social Security benefit. If you include all your Social Security benefit in the calculations, you'll be paying too much.
8. Look for free help from the IRS's Volunteer Income Tax Assistance program (income cap: $54,000) or AARP Foundation's Tax-Aide program (no cap). Ken Johnston, who runs the AARP program in Greensboro, Vt., says that even people who do their own taxes "come in because they want a double-check, or they want to file electronically." Sites are open Feb. 1 to mid-April. To find a location, go to aarp.org/findtaxhelp.
Jane Bryant Quinn is a personal finance expert and the author of How to Make Your Money Last.
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