Kids off to College? Tax Deductions for Empty Nesters

    

Empty nesters that have recently sent their children to college may be searching for ways to save on their income tax bills. For these taxpayers, the loss of dependent children may also mean the loss of significant tax deductions which can cause their tax bill to rise considerably. Taking advantage of tax savings for empty nesters can help these individuals keep more of their money at tax time.

tax resolutionWork-Related Deductions

There are several ways for empty nesters to save on their taxes at work. One way is to adjust their W-4 forms to allow for more taxes to be withheld from their income. This suggestion only works for those who receive large refunds, since it allows them to receive more of their pay each pay period, rather than waiting until the end of the year to receive it. Another suggestion for tax savings is to take advantage of home office expenses for self-employed taxpayers. Those who work for themselves and use a part of their homes regularly and exclusively for business can claim a portion of their home costs as a deductible expense against their self-employment income.

Savings at Home

Taxpayers can also take advantage of possible tax deductions at home. Replacing older appliances with energy-efficient models reduces the cost of utility usage in the home and the IRS often allows taxpayers to claim a portion of the purchase and installation expenses as a deduction. Those who own second homes can claim the mortgage interest on both their principal home and their second home as an itemized deduction on Schedule A.

Making Charitable Donations

Empty nesters who give money and time to charity may be able to write off more donations than they think. The IRS allows for deductions for cash contributions, noncash donations (such as clothes, furniture, and food) and even the mileage driven during the course of charitable work.

Investing Wisely

Long-term investments can be a great resource for additional income but they can also increase the tax bill for empty nesters. Taxpayers can reduce their taxable income by purchasing tax-free bonds, buying mutual funds just before the dividend payout and keeping up with their buy and sell activity for the year.

Empty nesters who want to avoid tax problems and getting hit with an additional tax bill can use many IRS-approved deductions to keep their tax bill manageable. By claiming these tax savings for empty nesters, older taxpayers can keep their tax liability at an affordable level.

*Image courtesy of freedigitalphotos.net

New Call to actionTax Credits Guide