Filing taxes can be overwhelming as it involves gathering the necessary receipts, income statements, and expense sheets and working for hours on end. It is also an important task, as filing improperly can land one in trouble with the IRS. Also, most individuals commonly miss out on taking advantage of the possible tax deductions available to them. As a result, they end up paying high taxes. Here are 7 tax deductions that are commonly overlooked: Charitable contributions Many taxpayers make charitable contributions during an annual year. Most of the time, these contributions are made via cheques or online transfers. Some might even be donating appreciated securities. That said, there are other expenses one might be making out-of-pocket. These can be traveling expenses for one of their volunteering trips or cooking for a soup kitchen. Essentially, any charitable contributions made to help charities can be highly overlooked when filing taxes. To file these expenses as tax deductibles, individuals must keep these receipts handy. They need to itemize and categorize these expenses properly to make the most of this opportunity and ensure they are not denied refunds due to limitations and restrictions. Child tax credit For 2023, the child tax credit was estimated at up to $2000.

“A penny saved is a penny earned” is an age-old but evergreen proverb. And schemes like the 401(k) help one save strategically for their retirement. Provided by one’s employer, this scheme reduces one’s taxable income, but with the traditional 401(k), withdrawals from the fund after retirement are taxable. In contrast, with the Roth 401(k), there are tax reductions from the income but not from withdrawals.  However, one should avoid certain mistakes as a 401(k ) user. Common mistakes people make Here are a few common mistakes people make with their 401(k) plan: 1. Not knowing about the different types of 401(k) accounts As mentioned before, the traditional and Roth 401(k) are the accounts one has under this scheme. In the traditional scheme, one isn’t taxed on their income, but the amount withdrawn after retirement is taxable. In contrast, in the case of Roth, one incurs taxes from their income but not during withdrawals. Each strategy has its pros and cons, and account holders should be aware of these before shortlisting either. 2. Withdrawing early from the 401(k) With 401(k) accounts, it’s always a good idea to be patient with the returns. If one withdraws before the age of 59.5, they face a 10% penalty, over and above the income tax on the distribution.

People planning for their post-retirement years often look towards various investment avenues to save money for a stable and comfortable life later. How well or poorly one manages their money during their working days decides the level of comfort they will have once they have retired. Among the many great investment avenues for the long term, annuities are a solid option. To get the best out of them , one must avoid these six common mistakes . Investing too much money in annuity Despite how great they are in accumulating money for future use, annuities have a reputation for being somewhat inflexible. Immediate annuities help return more ROIs than interest on CDs and similar fixed investments. The only catch is that investors have to give up control over their money to get the extra income. This is ensured when the investor gives their insurer a lump sum amount for an immediate annuity and the former cannot take it out at any point. In the case of deferred annuities, while people can withdraw cash as per their wants after they invest in them, the income guarantees are reduced once the withdrawals exceed a certain limit. For this reason, putting too much money into an annuity plan can result in a serious cash crunch/loss of liquidity for investors.