Tax benefits you may be missing

We asked the 2017 Top Financial Professionals in Northern Virginia what benefits their clients typically miss when filing their taxes.

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We asked the 2017 Top Financial Professionals in Northern Virginia what benefits their clients typically miss when filing their taxes. Here’s what they shared:

“One of the biggest mistakes people make is not investing in either an individual or an employer-sponsored retirement account like a 401(k). While some may know that they have the opportunity, I don’t think they really ascertain what that means not only today by deferring tax but also saving for retirement.

For those that do do it, they don’t do it enough. For instance, if you work for a company that has a 401(k) plan and they say that they will match 3 percent of anything you put into it, some people will only put in 1 or 2 percent, so they are missing out on that math. At minimum you want to match that 3 percent because it’s like getting a 3 percent raise.

Individuals may be able to lower their tax liability by contributing to a retirement plan such as a 401(k) or IRA. Making contributions to other types of tax-advantaged accounts such as health savings accounts or flexible spending accounts can also produce tax savings. There are also numerous tax credits that are available to individual taxpayers as well. Some examples include credits for child care expenses, adoption credits, credits for tuition and higher education expenses and credits for installing certain energy-efficient improvements in your home. Contributing to state-sponsored Section 529 plans are also a great tax-advantaged way for individuals to save for future college expenses for themselves, their children or other family members.”
–William S. Duvall, CPA and CVA, DuvallWheeler CPAs

“Make sure you itemize your deductions. People should look at their charitable activities (like if they are already volunteering at the local PTA, YMCA, their kids’ school, church, etc.), and if they are doing a lot of driving for that organization, they can take charitable deductions there. If a person is volunteering and buying food for these events or meetings, they should keep receipts and get a letter from the organization saying “thank you for contributing,” and that can be a charitable deduction. If a person is very active and has a lot of charities that they participate in, it adds up over time. That’s one that people don’t think about. There are also smaller deductions unique to certain industries, like special breaks for teachers if they buy supplies for the classroom. If you are a student, there are a number of education credits available (found in the IRS publication 970), like lifetime learning, HOPE, American Opportunity, et cetera. This could be for college students, but it could also be for any degree oriented individual. They don’t have to be 20-somethings—it could also be someone working towards their master’s. The other one is solar panels, which are being heavily marketed in this area. If you do install solar panels, there’s a tax benefit to that. I’m sure the salesman will tell you about it!”
–Joan Holtz, Tax Partner, BDO USA LLP

(September 2017 Top Financial Professionals)