Three Ways to Save Before, During, and After Filing Your Taxes
Here are a few strategies that could save you thousands.
Who doesn't like saving money? When it comes to cutting costs and saving smartly, it's all part of building better financial habits for a healthy budget—and this includes saving money on your taxes. Before rushing to send your return, there are ways to reduce your taxable income, contribute to tax-exempt accounts like a health savings account (HSA) or traditional IRA, and maximize itemized deductions.
Ahead, we tapped a credit spokesperson, Dana Marineau, chief marketing officer of Rakuten Rewards, to weigh in on money-saving strategies.
Change Your Method of Filing
The first step consumers can take to saving money on their taxes begins with the way they file. "Many people often overlook the fact that they can actually save money when filing taxes online," says Marineau. "Going through a shopping rewards site like Rakuten is an easy way to earn up to 25 percent cash back on services like TurboTax, H&R Block, and e-File."
After you've successfully filed and received your tax return, what you spend your tax return on can factor in how much money you save for the course of 2021. Marineau recommends consumers spend their tax refund dollars on home improvements, repairs, paying down debt or depositing a portion of your refund in a high-yield savings account, or purchasing that new appliance that you've been eyeing over the course of the year. Each of these tax refund spending suggestions either adds value to your life, home, or bank account.
Contribute to the Right Accounts
Just as there are smart ways to spend and later save on your tax refund, there are some "don'ts" as well. Marineau recommends not spending your tax refund all at once or purchasing items that exceed your tax refund. She advises against putting the check in the drawer, forgetting about it. Instead, deposit the check right away as governmental checks have expiration dates. That is money (and opportunities) you're missing out on.
All in all, saving on how you file, and what you decide to do with your return afterward, sets the foundation for smart savings. "Don't fool yourself into thinking that it's extra money," says Marineau. "If you keep in mind that it's a refund versus extra cash, you will be more prudent in how you spend it."