Most people dread tax time even more than going to the dentist. And no wonder, considering how complicated filing your personal income taxes can be. This is especially true when you have multiple income sources, lots of deductions, Form 5471, and other types of things that make filing your return a nightmare. The key to reducing the stress of this season of the year is to understand a few important tax-saving tips.
This article takes a look at important money-saving strategies for how to reduce taxes owed. It’s easier than you might think, so read on to learn tips for keeping more of the money you earned last year.
Defer Income:
Let’s start by talking about the power of deferring as much income as possible.
The truth is, there are a handful of deductions such as mortgage interest that can be deferred to the following year’s taxes. This is just one example that you can use to your advantage for cutting your tax payments for the current year.
The key is to check the Tax Cuts and Jobs Act that was passed in 2018 to learn all the specifics or speak to your local tax expert to get the insight scoop on what is permitted by the IRS.
Maximize Contributions to Your Retirement:
Here’s a little secret that’s not a secret at all: When it comes to taxes, your retirement accounts are your secret weapon.
Keep in mind that any pre-tax money contributed to your retirement accounts won’t be taxed until you retire. This allows you to build wealth for retirement while also reducing how much you owe in taxes each year.
Give to Charity:
Do you have a few charities you regularly donate to? If so, this is a great way to reduce your tax burden while giving back to the community.
The key is to make sure to make all donations by December 31. It’s also important to understand that you can put the donations on credit cards, take advantage of the deduction, and then pay off the credit card debt at your convenience.
Be sure to check out these top 10 tax planning strategies at WealthAbility.
Start Saving for College:
It’s no secret that higher education is more expensive than ever before. That means you need to start saving as soon as possible. Fortunately, you can’t use contributions to your children’s college funds as deductions on your taxes.
The key is to set up a 529 plan and deduct those contributions from your state return. Just be aware of the maximum yearly contributions permitted by the IRS.
A Guide to Important Tax-Saving Tips:
Sometimes it feels like you have to have a degree in accounting just to complete your annual tax return. Fortunately, this guide to easy-to-understand tax-saving tips will help make filing your taxes this year a far less stressful experience.
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