10 Ways to Save This Tax Season
The savviest ways to save during tax season (and beyond).
You can’t avoid taxes, as good old Ben Franklin warned us. But if you’re savvy, you can craft a plan for cutting costs as we head towards April 15. “Thinking about saving money at the beginning of the year is such a smart idea, because you have time to plan ahead, and that can really help your savings add up over the course of the year,” says Andrea Coombes, a tax specialist with NerdWallet.
Consider these expert tips for saving some green during tax season (and beyond).
Assess Your Spending
“After the first of the year, most people are dealing with holiday debt hangover, so pull out your bank and credit card statements and examine what you’ve been spending for the last three months,” suggests financial consultant Steve Sexton of Sexton Advisory Group. “Take a look at phone packages, car insurance, anything that you might be able to get a better deal on.”
“NerdWallet found that 38 percent of Americans who have auto insurance haven’t checked the price in at least three years,” Coombes says. “Good drivers can save big. And if you shop around early in the year, that’s money that you’ll have in your pocket.” Speaking of auto insurance, drivers can save an average of $393 with AAA*.
Delay (Shopping) Gratification
Have your eye on a shiny new refrigerator? Or a new TV? Try holding off until May, when you can score major savings on big-ticket items—up to 50 percent—during Memorial Day sales. Pro tip: Ask the salesperson about special discounts; he or she may be able to shave the price down even further.
Many people received gift cards for the holidays—and some didn’t want them. That’s good news for you. Websites like CardKangaroo and Gift Card Granny buy those unwanted gift cards, and then sell them at a discount of up to 30 percent off.
Meanwhile, another card—your AAA Membership card—can also help you save. "Visit the AAA website for discounts on restaurants, entertainment, travel, and personal services,” suggests Amber Fauber, a AAA Member Services Branch Manager.
Check Your Daily Habits
If you’ve been eating lunch out, try packing your lunch for work. Hitting the coffee shop every morning? Consider scaling back. One of Sexton’s clients started making her own flavored coffee at home, effectively cutting her “latte factor” expense from $350 to $45 a month. “That’s money that she can use to pay down debt,” he says.
Streamline Your Streaming
TV streaming costs can spin out of control. Check your plans to find saving opportunities. Are there streaming services you don’t use? Does your plan include add-on movie channels that you never watch? With services like Hulu and CBS All Access, you can nearly halve your monthly bill by switching to a plan with commercials. If you have a library card, subscribe to Kanopy to stream thousands of movies (10 per month) for free, from major studio releases to documentaries and foreign films.
“I find that most people don’t plan for trips,” Sexton says. “They say, ‘We’re going to go here,’ and they write a big check. But if they slowly but surely save—maybe $200 a month—they don’t have a massive disruption in that first quarter.”
For more travel advice, Sexton recommends the book Plan Your Escape by Wayne Dunlap. “There are wonderful tips on how to reduce the cost of hotels, when to buy airline travel to get the best deals, and when to buy cruises.”
If you’re a AAA Member, the easiest way to save on travel expenses is to connect with a AAA Complimentary Travel Agent. Members get travel deals on everything from hotels and car rentals to complete tour packages.
Conquer Credit Card Debt
Head into 2020 with a determination to quash your credit card debt. A NerdWallet analysis found that American households with credit card debt pay an average of about $1,100 in interest every year—and that dollar amount jumps to almost $1,400, on average, for couples with children. “That interest payment is really eating into your savings and affecting your overall finances,” says Coombes. “If you qualify, roll that debt over to a balance transfer card that offers zero percent interest.”
Another idea is to negotiate your credit card’s annual percentage rate. “Consumers with a strong credit score have a better chance of success here, but it never hurts to ask,” Coombes says. “Just call your card issuer and ask if they’ll lower your APR.”
Regardless of your rate, hatch a plan to pay down your debt. One smart move: Increase the payment you make to your highest-rate card to get it paid off first, which will save you money over the course of your debt pay-off.
Of course, as you pay down your balances, you’ll want to protect your shining credit rating. “AAA Members can get free essential credit monitoring services from ProtectMyID,” Fauber says.
Save on Tax Prep
Looking to save on preparing your taxes? “AAA Members can save $20 with TurboTax,” Fauber says. That’s an easy win.
“If you’re in a lower income bracket, AARP has senior centers and facilities that will actually do your taxes for free,” Sexton adds. “They have CPAs who give their time to help people get their taxes done.”
Trim Your Tax Bill
One of the smartest things you can do to save money on your taxes is to open and contribute to an IRA account. “That has a double benefit,” Coombes says. “You’re saving for retirement. But if you qualify, there’s also a nice tax break that will reduce your total taxable income. And even up to April 15th, 2020, you can use an IRA to reduce your 2019 tax bill. That’s a pretty rare tax break. For most tax breaks, if you didn’t do something in 2019, your chance of getting that tax break is over.”
If you’re helping to support a loved one, it might make sense to give end-of-year gifts in the form of securities (stocks, mutual funds, bonds) rather than cash. This is especially helpful for people of the “sandwich generation”—who are caring for their kids who haven’t quite launched and for their aging parents—says certified financial planner Greg C. Sarian of Sarian Strategic Partners | Hightower.
“If you have a single child in grad school and you’re helping them with tuition payments, and if they’re earning less than $40,000 a year and they’re over 24, their tax bracket puts them in a 0 percent capital gains rate,” Sarian says. “Similarly, if you have aging parents who you’re helping financially, and they’re earning less than $80,000 as a couple, it’s a 0 percent capital gains rate. So instead of writing your parents a $10,000 check, you can give them a security that you paid $5,000 for, that’s worth $10,000, and they can sell it tax-free.” Note: The income totals listed here for both singles and married couples are the ceilings of combined income including gains from the sale and earnings. If you have more questions, talk to a financial advisor for guidance.
Save an average of $393 when you switch to AAA Auto Insurance.*
*Average savings as calculated by the J.D. Power “2017-2019 Insurance Shopping Study as of April 2019.” See https://blog.jdpa.com/insurance/states-with-the-most-and-least- affordable-auto-insurance. See also, https://www.jdpower.com/business/press-releases/2019-us-insurance-shopping-study. The study is based on responses from more than 14,400 insurance customers who requested an auto insurance price quote from at least one competitive insurer in the past nine months and includes more than 38,800 unique customer evaluations of insurers. The study was fielded in April, July and October 2018 and January 2019. Products and their features may not be available in all states. All policies are subject to policy terms, underwriting, guidelines and applicable laws. Insurance premium does not include the price of Membership. Insurance products in California offered through AAA Northern California Insurance Agency, License #0175868, in Nevada by AAA Nevada, in Utah by AAA Utah, in Arizona through AAA Arizona, Inc., License #8301727, Montana through AAA Montana, Inc., License #9756, and in Wyoming through AAA Mountain West Inc., License No. 172603. The provider of AAA Auto and Home Insurance is CSAA Insurance Group, a AAA Insurer. All policies are subject to policy terms, underwriting, guidelines and applicable laws. Multipolicy and other discounts vary based upon eligibility. Discounts not cumulative; certain restrictions apply. ©2020 AAA Northern California, Nevada, Utah all rights reserved.