Let's tackle 2021 tax season

article picture

I can hear you falling asleep at the idea of reading a whole post just about taxes. And I can’t really blame you. Taxes are confusing and boring — sometimes on purpose. But like anything that’s hard and a little boring, it can be also be very rewarding if you put a little effort in. 

Your 2020 tax return is probably going to look different from any other that you’ve done. Maybe you got laid off of work, or had your hours reduced. Maybe you switched careers altogether, or went freelance. Maybe you worked from home for an entire year. Whatever it is, this year there are a few tricks you can use to optimize your tax return. 

Keep in mind, this is not official tax advice. We’re not tax advisors, and you should always discuss crucial tax questions with a real advisor. These are just some general tips that might apply to you. 

Check for special coronavirus tax relief 

During the pandemic, many countries introduced large relief bills that were meant to pump up the economy while stores were closing and everything was locking down. Some of these measures extended to personal taxes, and you might be eligible to claim some of them this year.

For example, in Germany, the amount you can deduct for having a home office increased — though you still have to have had costs above a certain threshold for it to be felt in your taxes. In Spain and France, the countries introduced measures to allow deferring some tax debts, as well as the deadline by which you have to file. 

Deduct those charitable contributions 

No matter where you are, your country probably allows you to deduct your donations to charity from your taxes. This can make more of an impact than you think — especially if you’re donating a recurring amount every month. In order to be able to deduct what you’re donating, you usually need to be giving the money to a recognized charity, and they should be issuing you a tax receipt. That tax receipt usually arrives in the mail or by email once a year shortly before tax season. Even donating 10 euros a month every month can end up getting you a lot of money back.

Check those gains (and losses)

Capital gains — the money you earn from investing in stocks, bonds, ETFs, crypto currencies and a host of other things, are all taxable income. But what if you didn’t have gains? What if you instead bet everything on Gamestop, and sold at the wrong moment, and lost a bunch of money? Then you have capital losses. These can sometimes be credited against gains you made, or otherwise be used to lower your overall tax bill. 

The specifics here are complex, so if this applies to you, your best bet is to talk to an actual tax advisor. Depending on how big your losses are, it could be very worthwhile for you. 

Watch for extra benefits if you moved 

Some people, either voluntarily or not, moved during the pandemic. If that move was job-related — and moving to a new city for a job usually counts — those costs can also be deducted from your taxes. It’s very important here to keep receipts of all your expenses, from the car you rented to the moving company you hired to the storage unit you used for your furniture. If you had to pay for all those things yourself, you can claim a lot of it back on your taxes. 

If you didn’t notice it before, it should be becoming clear to you how different the amount of money you get back from a tax return can be, depending on how prepared you are. In a way, it is unfair — you deserve all the money you can claim back. But all the more reason to be informed. It could end up making a significant difference for your finances.