Filing a tax return might not be a thrilling thought. But imagine filing a tax return after you’ve uncovered hundreds or even thousands of dollars in savings on your tax bill.
You don’t have to showcase the skills of an accounting expert to find a few simple ways to save money. Here is our quick and straightforward guide on how to save money on taxes, with our top six tips.
1. Move Funds to Your 401K
Saving for retirement is always sensible, whether you are doing it to reduce your tax bill or not. But a bonus of contributing more to your 401K is that it will reduce your taxable income. That’s a win-win.
Start reviewing upward limits on investing in your 401K, as the limits are different depending on how old you are in that tax year. For example, the over 50s can add $6500 more annually into their 401K during this tax year.
2. Start a College Fund
It’s a common saying that it’s never too early to save for your child’s college fund, even if they are still in diapers.
The best college plan for tax benefits is the 529 plan. You can use this plan to pay for your student loan or contribute to college funds. Any earnings from these plans are not taxed, so it’s a suitable place to put your savings.
3. Audit Your Above-Line Deductions
Are you including all deductibles in your current tax returns? It might be time to audit what tax deductibles you should include in your above-the-line deductibles.
That might include individual retirement accounts, self-employment deductions, alimony, and student loan repayments.
You should also consider potential property tax deductions. You can check out McKirdy, Riskin, Olson & DellaPelle for more information on that.
4. Consider Tax Benefits for Dependents
If you live with a child under 17, you are entitled to as much as $2000 in child tax credits.
If you pay for childcare, whether for babies and toddlers or school-age children during summer camp, you can also claim up to $1050 for your first child and up to $2100 if you have more than one child.
Tax benefits on dependents also include other relatives, such as an elderly parent, and non-relatives, such as a minor who permanently lives with you.
5. Add to Your Healthcare Plan
Adding funds to your healthcare plan is an easy way to save money when paying taxes.
Not only will healthcare savings help you with your tax bill, but they will also give you peace of mind. You’ll have a financial cushion in the unfortunate event that you need to dip into the fund to pay for unexpected medical bills.
6. Review Your Charitable Donations
We can all give a little bit extra to those in need. As well as helping out excellent charitable foundations doing important work around the globe, donating to charity also comes with a tax benefit.
The IRS has a list of charitable groups that qualify for a tax-deductible when you donate. So check out this list, find a good cause waiting for your support, and start saving on taxes.
How to Save Money on Taxes
Follow through with these six tax tips and tricks because it pays to be proactive. If you want to discover how to save money on taxes, be thorough about deductions when planning your tax return.
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