Even if you will be getting a refund, you’re probably like most people: You dread even thinking about preparing tax forms and delay doing your taxes as long as possible – even though renters generally have more simplified tax returns. Preparing your taxes often forces people to take a reality check, which can be one of two things – I made how much and where did the money go? Or, I made how little? Yikes.
Regardless, as painful as it is, it must be done. After all, wasn’t our current tax system (or at least its humble beginnings) one of the reasons for the Revolutionary War? (Reach back to high school history: taxation without representation? Bueller, Bueller?) So, we have a patriotic duty to file taxes (as well as a legal duty).
To ease your pain just a bit, here are some basics that may help you renters out and save you a few bucks.
- File. Just File. More than $1.3 billion in tax refunds have not been claimed because the rightful owners never filed tax returns. Just because you don’t have to file if you don’t owe tax, you should file to get your money back. And, for those planning to file and get a refund, do it early – Uncle Sam is holding your money.
- Assuming Makes an… . Don’t just assume that you won’t qualify for to itemize and use the standard deduction instead. Take a few minutes to look at all the various types of deductions that can be itemized – medical costs, taxes, job hunting costs, moving expenses. Of course, there are limitations, but do your homework. It may just pay off.
- Renters Get Tax Credits, Too. It isn’t just property owners who get property tax credits. Depending on your jurisdiction situation, you may be entitled to a property tax credit – even as a renter. Many states call the credit a “homestead” credit, so don’t let the name throw you – look to see if renters qualify. Check your state’s tax rules (probably described in the instructions to the state income tax form), but here are a few states with specific credits: California, Maryland, Michigan, Missouri and Wisconsin.
- Charity Starts at Home. Don’t forget – if you itemize, you can deduct your charitable contributions. This includes “in kind” contributions such as used clothing or furniture. If you are moving or otherwise need to clean out your apartment, you can get something when you give something. Instead of putting your old couch out by the dumpster for someone to pick up, call Salvation Army or your favorite ‘white elephant’ shop and get a tax receipt.
- Work Your Home Office Deduction. With the challenging economy, many more people are freelancing these days and working from home – getting 1099s instead of W-2s. Being on your own can create a significant tax burden, but, if you are new to freelancing/consulting, you should look into a home office deduction. This deduction may allow you to deduct a portion of your rent, utilities and other apartment expenses. Don’t lose out on valuable deductions.
One last point, after your taxes are done, you might want to use this opportunity to reevaluate your tax withholding levels. If you received a large refund and don’t expect significant changes to your tax situation this year, you might want to increase your exemptions (i.e., have less tax taken out of your paycheck). If you paid in, maybe you want to increase your withholding. Here’s an IRS tax withholding calculator that can help you.
In the end, taxes are an expensive pain. On the bright side, tax time only comes once a year.