When tax time comes around, people suddenly realize that they could have saved hundreds or thousands of dollars if they had prepared ahead of time. Well, now’s the time to put your plan in place, so you don’t end up owing Uncle Sam at the end of the year.
- 401(k) all the way
The best way to owe less to the IRS? Make less money. We know, no one really wants to do that, but you can limit your taxable income by investing in your retirement. If your company offers a 401(k) plan, any money you contribute doesn’t count towards your taxable income for the year. Plus, your company may match a percentage of your contribution, which means you can earn free money. Cha-ching!
- Give, give, give
Donating to charity is a great way to lower your tax bill while helping someone in need. Whether you’re giving money, your old clothes or furniture, or even a car, your donations can add up to big savings later on. Remember to document every donation by getting a receipt or a signed letter from the nonprofit you’re donating to. This will serve as proof of your charitable deeds for the IRS.
- Invest in yourself
There’s nothing more important than your health. With a Health Savings Account (HSA), you can put aside part of your income for medical expenses while reducing your tax bill. Your contributions are deductible, withdraws aren’t taxed either – as long as you use the money for medical purposes.
- Keep your receipts
A simple but often overlooked way to lower your taxes is to keep track of your expenses. If you travel for work, you can deduce costs associated with your trips. You can even write-off parking, tolls, and mileage for business expenses in your own town. If you want to get credit, you need to keep your receipts so when tax time comes around you know exactly what you spend out of pocket.
- Get credit for your credits
There are many tax credits available, but you have to know about them if you want to take advantage of them. Two of the most popular are the Lifetime Learning Credit and the Earned Income Credit. The first can be used to offset your tuition and other educational expenses. The second is designed to help low-income individuals reduce their overall tax bill.
By implementing these simple strategies, you can reduce your tax bill or increase the amount you get back on your return. And when tax time rolls around, remember the pros at Happy Tax are always here to help you. With transparent, upfront pricing; 24/7 customer service; and a team of licensed CPAs, we have everything you need to get your taxes filed accurately and on time. Want to find out more? All you need to do it click here.