When you work hard for your money and you are invested in making it go as far as possible, your options to keep it in your own pocket may vary. Being savvy when it comes to personal and business investments is obviously the best way to get your money working for you throughout the year, but what about when it comes to tax time? There are several avenues you can take to maximize your dollar’s potential year round, and here at 1-2-3 Financial Services, we’re well equipped to advise you in whatever direction that may be. A tax accountant can help direct your money into the safest and most advantageous avenues to make your money work for you, all while securing your biggest and safest income tax filing.
You might need some assistance from a tax preparer, but making moves throughout the year when it comes to your employment situation can be the first great way to start stretching your income and saving in terms of taxes. IRAs (Individual Retirement Account) are a great way to start, and there are two types. The Traditional IRA which allows you a tax deduction up front under certain income eligibility requirements, or the Roth IRA, where you contribute after tax dollars based on certain income eligibility requirements. One allows for growth tax deferred, and the other allows for growth tax free. If you acquire your health insurance through your employer, a HDHP (High Deductible Health Care Plan) paired with an HSA (Health Savings Account) can be really ideal. You’ll pay a higher deductible but a lot of companies will actually contribute to your HSA, and that money is tax free for federal tax purposes. Your personal contributions are made tax free and these contributions will probably help lower your premiums because your deductible will be higher! Your account balance rolls over too from year to year. So if you’re one of the lucky ones who goes through your calendar year without accidents, injuries, or any other expensive medical necessities, you’ll have it for the next year too.
Some other ways to make your income work for you and save on your taxes is by making maximum contributions to company savings plans. Plans like a 401(k) have growth that is tax deferred. Do you maximize your contribution so you get your company’s maximum match? Well that’s an excellent way to grow your money and save on your taxes. Basically the money you invest in your 401(k) is not taxable at that time so not only is it not taxable, but it will begin growing for you too. When you withdraw money, you’ll end up paying taxes on it at that time depending on what and when it’s being withdrawn, but you’ll have the chance to invest that money you’ll be saving on your taxes instead. Along the same lines, if you received a really big tax return last year you may consider filling out a new W-4. That money you got back is essentially your money that you lent the government free of charge. To get that money in your pocket where you probably need it more, and out of the government’s pocket, simply adjust how many you’re claiming on your W-4, and definitely don’t have more withheld!
What about not so obvious methods of saving on your taxes through tax credits? The government offers up a whole lot of reasons for tax credits and most of us are eligible for at least a few. You might need to find a tax professional for some tax saving tips though, because some of them take action on your part to receive them. For example, installing energy saving equipment like solar panels will earn you a credit. The credit is for 30 percent of what the homeowner spends on the equipment or property. This includes the aforementioned solar panels, but also certain kinds of energy efficient water heaters and cooling systems, roofs, and windows and doors. Checking to see if you qualify for the EIC (Earned Income Credit) if you don’t make too much money can get added to your income tax as a credit. The credit is generally for low to moderate income couples, and those with children. The child tax credit applies to those with dependents under 17 in the home, though higher income households don’t have that credit, and if you have any of those dependents in childcare? That’s a credit too.
Of course there is always the hard line in the sand, “Do I go with the standard deduction, or itemized deduction option on my income taxes?” The answer is pretty simple. Fill out a Schedule A to determine if you have enough expenses that carry you over the standardized deduction amount. Either way, you should definitely find a tax preparer if you’re not sure what you can deduct. There are vast amount of business and personal expenses you can add up to get the most from your itemized deductions!
Really, when it comes down to it, your taxes can be confusing and pretty intricate. Millions of Americans turn to tax professionals to help them work out what is best for their tax filing needs. Often times people find themselves sold short or receiving less than their maximum benefit simply because they just don’t know their options. We absolutely want to equip you with the tools and information to file correctly, on time, and with your personal and business investments at the forefront of our concern. Click on the link below to schedule an appointment with 1-2-3 Financial Services. We’ll advise you in the best way to save on your taxes!
