What your tax return reveals about your financial health

After tax day has come and gone, you may put that return into a filing cabinet and forget about it, right? Well, it might be worth giving it another look before putting it away. A tax return can be a powerful tool in helping you see where you are financially — and where you're going.

Not only can it help give you an overall view of your current financial picture, it can also be a good place to start when making or adjusting plans for the next chapter of your life.

Here are three important things you can glean from your tax return.

1. What is my income now, and what might it be in the future?
   Your tax return shows your earned income, passive income (dividends, interest, capital gains), business income (such as a rental property) and retirement income (if you're already getting Social Security or retirement plan disbursements).
   
   By showing how your current income is divided among the four income buckets mentioned above, your tax return can help you begin to plan for the day when one of those buckets empties, such as earned income and another starts to fill up, such as retirement income. This can help you make adjustments now to reach your financial retirement goals.
2. Where does my money go?
   If you itemize instead of taking the standard deduction, one option could be to take a hard look at 1040 Schedule A. Places to zoom in: deductions for medical expenses, real estate and mortgage interest, and charitable donations. These areas highlight possible places to trim back, especially if you're coming up short of where you want to be financially in retirement.
   
   There may not be much you can do if you were hit with a major medical expense last year, but seeing that number might direct you toward rethinking how you will pay for health care-related costs in retirement, such as health insurance and savings.
3. Can I save more money, tax free or otherwise?
   Look at line 32 of the Schedule 1 you file with your tax return. This shows your IRA deduction. If you can, you may choose to put away the maximum allowed ($6,000 or $7,000 if you're 50 or older). These limits apply to both traditional and Roth IRAs.
   
   You can contribute up to the limit as long as you earn under $124,000 and are single or under $196,000 and are married, filing jointly. Keep in mind that these contributions are not tax deductible.

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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.