Three of the most common tax mistakes that we see. Hey, it's Jon from Financial MD, welcome to today's Didactic Minute.
Now there are many, many tax mistakes that can be made but I'm going to point out three for you real quick so you walk away at least knowing something better.
Number one is that every single donation you make to a charity or a nonprofit is tax-deductible. Most people are not able to deduct these donations. Are they tax-deductible? Yes, technically, but not for everybody because if you take the standard deduction – so you have two choices when you do your tax returns. You can either itemize every single possible deduction – property taxes, state taxes, mortgage interest, student loan interest – all those things, but if they don't add up to what the standard deduction is that's available, people will then just take the standard deduction and avoid doing all the work of itemizing everything. Right now, the standard deduction is, depending if you're married or single, it's around 26,000/27,000 if you're married filing jointly; about half of that if you're single, and then different if you're legally blind or over 65, all sorts of things. So, check that out. If you're not donating and having other deductions more than that, then you're taking the standard deduction and your donations don't count. Now, always donate. We're big believers at Financial MD. Donating is good; helping the community, charities, nonprofits, missions, ministries – do that. Just know, it may not be tax-deductible.
Number two, you have to make your IRA contribution by the end of the year – no, you don't. You've got until you file your taxes when you actually can make it for the previous year. So 6500 was the IRA limit for anybody under 50, so that's most of you watching I'm guessing. So that's something you can still do for last year and then do for this year if you've got a lump sum that you want to take care of and do your Roth, do your backdoor Roth, do your regular IRA – whatever the case might be.
Number three, one of the big tax mistakes that we see when people are filing their taxes. Residents that are transitioning into practice that year, two things happen. Number one, they're in the lowest tax bracket they're ever going to be again, most likely, and number two, they've got a 401(k) or a 403(b) that they saved into during their residency that they can convert to a Roth, pay the taxes now, and now it'll grow tax-free forever.
So, more questions on that, hit us up. We'd love to show you how to do these things – no problem. Put in the comments below if you've got further questions or you see other tax mistakes. Make sure you like and share this. Get this information out before tax day. Let's minimize what goes to the government and maximize what stays in our pockets.
It's Jon from Financial MD, we'll see you next time.