Are you hoping to save money on taxes, but aren’t quite sure where to begin?
There are many different tax deductions and tips that people miss out on that could save them thousands of dollars. And, the best part is, you don’t need to be an accountant or a tax wiz to figure out how to save money.
What do you need to do?
Check out this guide to discover how to save money on your taxes.
1. Reduce Your Taxable Income
One of the best ways to save money on taxes is to reduce your taxable income. The less money you earn, the less money that can be taxed.
Of course, unless you’re independently wealthy, reducing your income for the sake of saving on your taxes won’t do you any favors. Luckily, you can reduce your taxable income while still making a decent living.
The best way to do this is to contribute more money to your retirement savings, whether it be an IRA or a 401(k). Any wages you defer to your IRA or 401(k) don’t count as taxable income. So, not only will you get a tax break now, but you’ll also be saving for your future – a win-win!
2. Fix Your W-4
Your W-4 is the form you fill out for your employer each year. With this information, the government knows how much money to take out for each paycheck.
If you received a huge tax bill last year and want to reduce that amount this year, one of the best things to do is to raise your withholding. This way, you’ll owe less money when it’s time to file.
If you received a huge refund, you can do the opposite and reduce your withholding. This way, you can live on a bigger paycheck throughout the year.
3. Set Up a Healthy Savings Account
Another great way to save money on your taxes is to set up a healthy savings account, also known as an HSA. In order to do this, you’ll need what’s known as a highly-deductible healthcare plan.
A healthy savings account can reduce the amount of income that’s eligible for taxation. It can also help you plan for future medical expenses.
If you’re single, you can contribute up to $3500 per year to your HSA. For couples and families, you can contribute up to $7000. Also if you’re over the age of 55, you can contribute an extra $1000.
4. Cash In On Tax Credits
Collecting tax credits is another excellent way to save on taxes.
For example, if you’re a parent, you can deduct up to $2000 for each qualifying child. If you use a daycare service, you can qualify for a tax credit of up to $3000 per child.
Tax credits aren’t just available for those who have children. If you paid someone else to care for your parents while you worked, then you may also be eligible to claim the dependent care tax credit.
If you need help figuring out which tax credits you can claim, we suggest working with an accounting firm like White Nelson Diehl Evans LLP.
How to Save Money on Taxes: Are You Ready to Save?
Now that you know how to save money on taxes, it’s time to put these tips into action. These tips can help you save thousands of dollars each year, so don’t neglect them.
Be sure to check back in with our blog for more tax-related tips and tricks.