Getting a tax refund is a great opportunity to get ahead of the game. As a single mother you need to be extra wise with how you spend your refund. There will be many different options that you'll come up with, but you must choose the one that provides the best future for you and your children.
If you are about to file individual income tax return, then there are three forms available for you; Form 1040ez, Form1040A and Form1040. If you are looking for the easy and least complex one, you should go for 1040ez. Before you start filing this one, you need to first consider whether you are eligible for it or not.
Tax credits are the best form of income tax savings as they can actually increase your tax refund, (by reducing your taxes) dollar for dollar, in the exact amount of the credit that you qualify for. If you have two children in college, you could reduce your income taxes by up to $5,000 each year, just from these tax credits alone.
There is also an income tax deduction for student loan interest which can be used to reduce your taxable income by the amount of student loan interest that you paid during the year. This isn't quite as good as a direct credit, because it only reduces your taxable income. As an example is you are in a 28 percent tax bracket and you have a $1,000 deduction for student loan interest, it will save you $280. (eg. $1,000 x.28 = $280)
The most taxpayers consider IRS 1040ez to be the easiest form for several obvious reasons. It is simple to file because many typical adjustments to your income can be excluded. But there are some financial issues which may prevent you doing this form and some of them are capital gain transactions like sale of property and stock, IRS deductions, alimony either received or paid, and some taxable social security advantages.
Your goal with your refund should be to invest. You may be thinking that you don't know anything about investments, and that's OK. Investments are things that bring more money to you. That's why a high-priced item or paying off your bills on time are no good uses of your tax refund.
You should not buy investments you don't understand, like stocks or trading currencies. You could use the money to start your own home-based business, or put it in an IRA or a college fund for your kids later. Anything you can do that will bring more money into your monthly budget will help you and your family later on down the road.
You only get this opportunity once a year, so be sure to get the maximum benefit that you can from it. Buying useless consumer goods is very tempting but you have to fight through it so your family can have a brighter future.
If you are about to file individual income tax return, then there are three forms available for you; Form 1040ez, Form1040A and Form1040. If you are looking for the easy and least complex one, you should go for 1040ez. Before you start filing this one, you need to first consider whether you are eligible for it or not.
Tax credits are the best form of income tax savings as they can actually increase your tax refund, (by reducing your taxes) dollar for dollar, in the exact amount of the credit that you qualify for. If you have two children in college, you could reduce your income taxes by up to $5,000 each year, just from these tax credits alone.
There is also an income tax deduction for student loan interest which can be used to reduce your taxable income by the amount of student loan interest that you paid during the year. This isn't quite as good as a direct credit, because it only reduces your taxable income. As an example is you are in a 28 percent tax bracket and you have a $1,000 deduction for student loan interest, it will save you $280. (eg. $1,000 x.28 = $280)
The most taxpayers consider IRS 1040ez to be the easiest form for several obvious reasons. It is simple to file because many typical adjustments to your income can be excluded. But there are some financial issues which may prevent you doing this form and some of them are capital gain transactions like sale of property and stock, IRS deductions, alimony either received or paid, and some taxable social security advantages.
Your goal with your refund should be to invest. You may be thinking that you don't know anything about investments, and that's OK. Investments are things that bring more money to you. That's why a high-priced item or paying off your bills on time are no good uses of your tax refund.
You should not buy investments you don't understand, like stocks or trading currencies. You could use the money to start your own home-based business, or put it in an IRA or a college fund for your kids later. Anything you can do that will bring more money into your monthly budget will help you and your family later on down the road.
You only get this opportunity once a year, so be sure to get the maximum benefit that you can from it. Buying useless consumer goods is very tempting but you have to fight through it so your family can have a brighter future.
About the Author:
Harris Smith is a writer on personal finance education. Her article tackles the pros and cons of home equity line of credit