Taxpayers are always looking for legitimate ways to save on taxes and with the right tax preparer, you will always get advice on ways to save on the amount you pay for taxes each season. The information provided here are just a few ways to help you reduce the amount you pay for tax. These tips and advice may not be applicable to everyone; your income and investments will determine the overall amount you save. It is therefore, best to consult Don Bell Law and learn from them the best ways for you to save on your individual taxes.
Donate to a Charity: This is one of the easiest ways to receive a tax deduction and the good thing is it applies to everyone. If you donate to a qualified non-profit organization, you can get tax exemption against the donation. Ensure that your donation is on a 501(c) tax receipt, so that when you are asked for a proof of donation, you have something handy. There are certain states like Idaho, where you get tax credits for all donations made. Find a qualified charity in your area and make a donation if you wish to receive a deduction for donation when you file your taxes.
Enhance Retirement Contributions: Your contributions to 401(k) also help to reduce your taxable income. When you are thinking about ways to reduce the amount of tax you pay, increase your retirement contributions. The system incentivizes you on saving and with this, you not only get tax credits, but you also save for a better future.
Medical Bill Consolidation: If you do not have a choice to pre-tax for medical bills, consolidating these make great sense. When there are big medical expenses, you can either push these expenses for the following year or ensure that other smaller medical expenses are made in the same year, so that all your medical bills can be consolidated.
Defer your Income: if you can predetermine your taxes for the following year and you feel that your liabilities will be lesser, you can defer certain income to the following year. You can do a similar thing for expenses by pre-paying them in order to increase the expenses and reduce the taxes in the current year. This is something that is highly applicable for a SME business owner as well as for a person who rents out property. Talk to your tax expert in order to understand the intricacies of the process and how you can go about doing it.
Credit Card Payments: You can calculate the payments made to your credit card as per the date of the charge. For example, the charge on the card is made in December and the payments are due in January, you can still calculate the charges for this year. These expenses could be medical, business or even personal. Depending on your liabilities, you can decide on how to manipulate these payments. Again, ask your tax preparer about the best solution for your specific case.
Increase your Health Savings Contribution: You receive specific tax exemptions for contribution to your health savings account. Moreover, all unspent amounts get carried forward indefinitely. This gives you a great channel to reduce the taxable income and at the same time maximize your potential savings.
Mutual Fund Investments: The timing of mutual fund investments is also very important. Most mutual funds pay their dividends at the end of the year. Now, in case you have bought the mutual fund scheme just a few days before the dividend is given out, you are still liable to pay the capital gain taxes. In order to avoid this, you must track the time when the mutual fund pays out its dividends. Invest in the mutual fund post the dividend payout period. This will save you from capital gain taxes for that year. While mutual fund investments are subject to market risks, investing in them wisely will make sure you save yourself some taxes.
The above mentioned are some of the tips that will allow you to save on taxes each year. If you are paying too much for taxes and need to save some money, consult Don Bell Law for information on advice on the most profitable tax deductions and savings. These tax professionals are trained to provide you with the best information and advice available to them. Therefore, it is always wise to go over your questions and tax returns with a professional tax preparer/advisor.
