Do you want to reduce your taxes for next year?
- Author Patrick Redo
- Published March 22, 2020
- Word count 657
Whether you are a first-time filer or a seasoned veteran, there are tips that can help lower the amount you owe in taxes or increase your refund. See how many you can implement now to keep more of your money in your pocket.
Get organized: Don’t wait to deal with your taxes every April. Start a box to house all your tax-related documents and fill it all year long with receipts for deductible expenses, 1099 forms, end-of-year statements, etc. When it’s time to start preparing your return everything will be in one place.
Claim all the deductions you can: Tax deductions can shrink your tax bill by reducing your taxable income. You can choose to itemize all your deductions, or just take the standard deductions that are available to all taxpayers. These types of deductions have almost doubled in recent years, making it a smart decision for most people. This list of tax deductions can help you as you prepare your taxes.
Claim all tax credits: It’s important to take advantage of all your deductions, but don’t forget tax credits. They can save you more money than a basic deduction. There are many available tax credits (education, adoption, dependent care, energy-efficient home improvements and many more.
Give back: Charitable contributions are an easy way to reduce your tax bill. Remember, there are many ways to give back beyond just writing a check. Toys, books, clothes and other household items may be donated to shelters or other organizations. Expenses from volunteer work can also be a tax benefit. Cost of travel or a donation to the charity you volunteer for can also be deducted but the non-profit organization must be a 501©(3). For taxpayers that need extra tax savings, think about bundling some contributions or putting two years’ worth of deductions into a single year. This could put you over the standard deduction allowing you to use all your smaller deductions.
Feed your IRA: Contributions to a retirement plan is the best way to reduce your tax bill. Remember this – the money you contribute to a traditional IRA is a pre-tax contribution, so it lowers your taxable income. This means you will owe less in income taxes, whether you itemize or take the standard deduction. For 2020, you can contribute up to $6,000 to an IRA plus $1,000 extra if you are 50 or older. You can contribute up to $19,500 to your 401(k) plus $6,500 extra if you are 50 or older. Contributions to Roth accounts won’t give you any tax deductions.
Use a Flexible Spending Account (FSA): An FSA lets you put away funds for qualifying healthcare expenses on a pre-tax basis, which shrinks your taxes. For example, if you contribute to your FSA and spend it on prescription drugs or doctor visits, that money won’t show as taxable income. Keep in mind that this is use-it-or-lose it money or 12 months.
Contribute to a 529 plan: If you have kids heading to college in the future then this plan is for you. These plans can vary by state but there is virtually no limit to your contributions and can grow on a tax-free basis before being spent on education expenses. Research 529 plans before you contribute.
Buy a home with a mortgage: Even if you are lucky enough to have the funds to purchase a home out right, you may still want to buy it with a mortgage. Mortgage interest is deductible and can help your tax bill. Also, the funds you save by purchasing with a mortgage can be invested for your retirement.
Use the correct filing status: If you file your taxes with the incorrect status it can be costly. Review the deductions above to see what status will help you the most.
If in doubt, consult a tax professional: While you are preparing your taxes and you’re unsure about something, consult a pro. It’s well worth the small expense to avoid an audit or tax penalty.
Want to improve your financial wellness? The experts at allU.S. Credit Union(https://alluscu.com) are here to help. Schedule a meeting with a member representative today.
This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.Article source: http://articlebiz.com
There are no posted comments.
- You Would Never Have Thought That Having Accounting Internship Could Be So Beneficial
- ACTIVATION OF UAN
- Focal motivations behind getting a Tax direct for Small Business Firms
- Avoiding the flood — tax issues with water rights in agribusiness
- Social security benefits for a family (COVID-19)
- How to use QuickBooks Component Repair Tool?
- Will you be responsible with your tax refund?
- Getting started with QuickBooks Enhanced Payroll in Brief
- Are DSTs Right For Your 1031 Exchange
- Tax Return Makeovers By Kenya Woodard
- Why have all crypto tax attempts failed?
- Are You a Corporation? Know Why Consulting a Tax Accountant Is Vital
- Share capital or share premium for your Dutch company?
- Everything investors should know about 1031 sponsors
- Why is the income tax so high in UK?
- Should I do my own tax return?
- Get More Money Back on Your Tax Return with help from the Tax Cuts and Jobs Act
- Don’t Fall Victim to these 3 Tax Scams in 2018
- Find Out If 72(T) Penalty Free Income Is a Solution for You
- 20 Things You Should Know About The New Tax Laws
- 4 Key Reasons Why Payroll Is Necessary Within A Business
- Accounting for doctors and GP's: Basic advice & guidance
- What is Cryptocurrency and Do I Have to Claim it on My Taxes?
- Here's Why Small Businesses Should Tap Bookkeeping Services
- Tax Tips for Teachers 2018
- Tax Extensions in 2017
- What to Do After Filing a Tax Extension
- Budget 2017: How it affects you
- 5 Tips On How to Avoid Scammers This Upcoming Tax Season