4 simple tips for reducing your tax burden this year
We all know that filing taxes isn’t kids play. And most nurses think it isn’t nurse’s play, either! In a recent poll of nurses by TaxReturnsForNurses.com, nurses cited “tax code is too complicated” and “it’s too time-consuming” as the things they dislike most about preparing a tax return.
But it doesn’t have to be so painful. There are ways of making taxes less of a nuisance—most importantly by developing a basic understanding of taxes and ways of reducing them.
Here are four easy tips for starters:
1) Understand what kinds of taxes you pay.
We all complain about taxes, yet most people don’t spend the time to really understand them. However, understanding the different types of taxes you’re paying is the first step in figuring out ways to reduce your tax burden.
For the most part, we all pay federal, state and local income taxes, Social Security taxes and Medicare taxes. If you’re self-employed, you have to pay twice as much in Social Security and Medicare since you’re paying for both the employer and employee contributions (this would especially be of interest if you’re an independent traveling nurse).
2) Look for ways to reduce your tax bill.
Maximize your deductions. As you prepare for this tax season, be sure to consider, at a minimum, this list of potential deductions.
• Professional licenses
• Professional organization dues and professional journal subscriptions
• Malpractice insurance
• Cost of uniforms, special clothing or shoes required on the job
• Upkeep expenses, such as laundry and cleaning, for uniforms and work clothes
• Cost of education required for your job
• Cost of education to upgrade skills required in your current job
• Protective clothing such as safety shoes, glasses, hard hats, etc.
• Union dues and expenses
• Tools, equipment and supplies necessary for your job
• Job search expenses
• Travel, transportation, meal and lodging expenses necessary for finding new employment
• Moving expenses when necessary for business reasons
• Child or dependent care (partially deductible)
• Home telephone bill expenses related to your job
• Tax return preparation fees from the previous year
• Donations to nonprofit charities
Deductions can be taken either as a “standard deduction” or an “itemized deduction.” In the latter, for example, to get your nursing-related deductions, you would list or “itemize” them on the proper form on your tax return (save your receipts). The other approach, which most people use, is to take the standard deduction. In the end, you want to use the approach that minimizes your taxable income the most. Be sure to get professional input here to get the best outcome.
Reduce your taxable income. Employer plans vary in what they offer, and each individual has to determine what’s right for his or her situation. However, if your employer offers a 401(k) retirement account, Health Savings Accounts or other ways of reducing your gross income, you can significantly lessen your tax liability. Essentially, these items are subtracted from your gross income, thereby reducing the amount of income to which taxes are levied.
3) Be sure to understand whether you qualify for tax credits.
Tax credits are a dollar-for-dollar reduction of your tax bill, if you qualify. One of the most common tax credits is for education, so be sure to keep track of nursing expenses related to education and training. Some other common tax credits are for child/dependent care, energy and earned income tax credits (EITC).
4) Get professional input.
Unfortunately, even these simple tips can be hard to fully understand without reading the tax code, so either find a local accountant or use tax preparation software. Most software programs do a good job of guiding you through the process of preparing and filing your tax return—all in the comfort of your home. You can also save a lot of money by doing it yourself, especially if you have a pretty straightforward tax return.
Carlos Navarro is a cofounder of TaxReturnsForNurses.com. When he and his partners began forming their company, they sought to create a single, comprehensive site where nurses could access tax-related information made relevant to their profession and then use that information to file their tax returns.
By Carlos Navarro