10 money-saving tax tips for police officers
Tax season is right around the corner, would you like to save some cash?
By Megan Wells
When you sign up for the badge, you aren’t signing a multi-million dollar contract for a life of luxury. You’re signing up for a modest paycheck and gratitude from those you help. If you’re like most officers, managing your money is a necessity. With tax season right around the corner, opportunities for managing money strategically will arise.
Here are some tips to consider when filing your taxes:
1. Did you spend time looking for a job this year? Your job hunting costs don’t need to come entirely out of pocket. You can get deductions for many items, like the cost of preparing a resume or travel expenses associated with interviewing and applying. These benefits are only available if you’re looking for work in the same occupation and it’s not your first job. These deductions may be subject a 2 percent rule, which means you can get a deduction only if your expenses are more than 2 percent of your adjusted gross income.
2. If you are a member of the union, you can’t deduct your union fees, but the fee is subject to the aforementioned 2 percent rule.
3. Did you relocate for work? Some of your moving expenses are deductible. You’ll need to prove your move was for a job and that you will spend less time or money commuting from your new home to your new job location in order to be considered for this deduction.
4. Does your work schedule require you to put your kids in child care? You may be eligible for a child care tax credit (different than claiming your child on your tax return), which can be up to $6,000 for more than one child.
5. If your employer offers a Flexible Spending Account, you may be able to save more money by spending “pre-tax” dollars on child care, too.
6. If your child is under 13, summer camps may also qualify for a tax credit. Don’t get too excited, though – overnight camps are not included in this benefit.
7. If you’re like many officers, you may realize your pension isn’t enough for a comfortable retirement. If you’re proactively planning for retirement, perhaps you’ve opened an individual retirement account. According to BankRate, you can get a tax savings for up to 50 percent of the first $2,000 you put into such accounts. This means you get a $1,000 tax credit, which is a tax break that directly reduces dollar for dollar any tax you owe.
8. Do you work as a contractor for a side company like private security or other off-duty gigs? If you are driving frequently, keep a written log of your mileage, because these expenses can be deducted.
9. If your side gig requires a 1099-MISC tax form (rather than a W-2) and you make less than $600, you won’t need to pay taxes.
10. If you’re a first-time homebuyer or a member of the military, you may be eligible for a mortgage tax credit worth up to $6,500.
Are you in the military? Here are three bonus tips.
You’ll qualify for different, even more lenient, tax incentives:
1. If you are a member of the armed forces and you move because of a permanent change of station, you can deduct your unreimbursed moving expenses with less regulation than a civilian.
2. If you’re a part of the military, you do not have to report your nontaxable pay, including combat pay, the Basic Allowance for Housing and the Basic Allowance for Subsistence. But you and/or your spouse can each choose to have your nontaxable combat pay included in your earned income. According to the IRS, including your nontaxable combat pay as earned income may decrease the amount of tax you owe and may mean a larger refund.
3. While we don’t recommend taking money from your retirement fund, if you’re in the military you may also be eligible to take early withdrawals from IRA and 401(k) accounts without a penalty. Use this option with caution, though; you’ll need that money in the future.
Everyone loves saving a bit of cash. Finding every loophole, deduction or credit you can during tax season is nice — especially if you aren’t lucky enough to receive a refund. If you use an accountant, pick his or her brain to find any other options not mentioned in this article.
- Financial Planning