Every tax season presents an opportunity to make key decisions that can significantly impact your tax liability. But do you know how to make the most of the options? Your filing status, educational credits, and other choices for making the right elections can lead to meaningful tax savings. You just have to know what’s what!
Common Tax Elections That Can Save You Money
When filing your taxes, there are key decisions you’ll need to make that can significantly impact the amount you owe or the size of your refund. These decisions, often referred to as “tax elections,” involve choosing between options that determine how specific income, expenses, or deductions are treated. Below are four common tax elections to consider, each with the potential to help you maximize your savings.
1. Choosing the Right Filing Status
For married couples, filing a joint tax return often yields the most significant tax benefits, but that’s not always the case. There are situations where filing separately might be the smarter choice. For example, if one spouse has substantial medical expenses and the other does not, filing separately might allow you to meet the 7.5% of adjusted gross income (AGI) threshold required for medical deductions. It’s important to carefully evaluate your situation. This is one decision that can greatly influence your overall tax outcome.
2. Maximizing Higher Education Tax Benefits
Families with college students face a crucial decision when it comes to higher education expenses: Should they claim one of the education credits (such as the American Opportunity Tax Credit or Lifetime Learning Credit) or opt for the tuition and fees deduction? The answer depends on factors like your modified AGI and eligibility requirements. Each option has its own phase-out levels, and choosing the wrong one could leave money on the table. A side-by-side comparison of potential tax benefits is essential to ensure you’re maximizing savings.
3. Investment Interest Deductions
If you incur investment interest expenses, you can typically deduct these expenses up to the amount of your net investment income. However, since capital gains often receive favorable tax treatment, they’re not usually included in this calculation. Here’s where a key election can make a difference: You can choose to include specific capital gains to increase your deductible interest expenses. While doing so forfeits the lower tax rate on long-term capital gains, this election could still work in your favor if the tax savings on the interest deduction outweigh the benefits of the reduced capital gains rate.
4. Managing Installment Sales for Long-Term Benefits
Selling real estate or other assets through installment sales allows you to spread your tax liability across multiple years, potentially keeping you in a lower tax bracket. However, there’s an alternative: You can elect out of installment sale treatment and pay the entire tax in the year of the sale. This approach might be advantageous if your income is unusually low in the year of the sale, allowing you to capitalize on a lower effective tax rate. The key is to assess your current and future financial situation to determine which option provides the greatest benefit.
Professional Guidance Matters—We Can Help!
Navigating these tax elections can be challenging, especially since the most advantageous choice often depends on your unique financial situation and long-term goals. Mistakes or oversights in making these decisions could result in missed savings or even penalties.
Let the tax professionals at NSO & Company help you make sense of these complex choices. With our experience and consultations to guide you, you can feel confident that your tax elections are optimized. Contact us today to discuss your tax planning needs and discover how we can simplify the process while saving you money!
Frequently Asked Questions
Our clients appreciate our fair, transparent pricing — no surprise fees, no confusing invoices. Individual tax returns start at $750, and business returns start at $1,500. If you’d like to talk through your specific situation before committing, a one-hour consultation with a CPA and tax preparer is $250.
Every client’s needs are different, so these starting rates can vary based on the complexity of your return or the scope of services you need. Visit our pricing page for more detail.
If you need accounting, bookkeeping, or tax services, contact us today — we’d love to learn more about your situation and provide pricing tailored to your needs.
We work with a wide variety of individual and business clients across central Indiana. Our clients range from entrepreneurs and small business owners to business professionals, retired individuals, families, and business corporations of all sizes.
Whether you’re just starting a business, managing personal and family finances, planning for retirement, or running an established company, we tailor our accounting, tax, and advisory services to fit where you are and where you’re headed. No two clients are exactly alike, and neither is our approach — we take the time to understand your specific situation so we can offer advice that actually applies to you.
NSO and Company is located in Fishers, Indiana, just off I-69 near the intersection of Lantern Road and 96th Street — an easy, convenient drive from anywhere in the Indianapolis area. Our office is at 8950 Fitness Lane, Suite 100, Fishers, IN 46037.
We’re open Monday through Friday, 8 am – 4 pm, and welcome walk-ins as well as scheduled appointments. If you’d like to speak with someone directly, call us at 317-588-3131.
NSO and Company combines years of experience with personalized service to help individuals and businesses prepare their taxes accurately and on time. We take the time to understand your situation, answer your questions, and look for opportunities to help you maximize your tax savings, while staying compliant and making the process as smooth as possible. Our clients also value our fair pricing and the confidence that comes from working with a trusted local firm.
