Nobody likes seeing a good portion of their paycheck going to Uncle Sam. And while there are certain things you can do towards the end of the year to help minimize your tax payment, it’s smart to plan ahead. Making good financial decisions year-round, like putting more money into a retirement plan, can often help you get a bigger return when it comes time to file your taxes. Check out these 5 easy ways to save money on your taxes.
1. Put More Money Into Retirement Savings
This is often a win-win: Your tax bills each year are lessened, and you will have developed good retirement savings habits that can leave you with more money in your golden years. This is a tax deferral, not an exemption; you will be taxed on the money upon withdrawal. Keep in mind that this only applies to traditional IRAs and 401(k)s, not Roth IRAs.
2. Stop Renting and Buy a Home
When trying to decide whether you should rent or buy, remember that mortgage interest and property taxes are deductible on your taxes. This should most certainly not be your only reason for buying a house, but if you do decide to do so, it can save you money on your tax bill.
3. Use All the Deductions You Can
The amount of deductions available to taxpayers seems almost endless. Above-the-line deductions are some of the most valuable because they do not require itemizing and they shrink the amount of your income that can be taxed. If you do any freelance work, you have to pay self-employment income on any money you make, but you can also deduct business expenses on your tax returns. Items like alimony payments and student loan interest are also tax deductible.
4. Consider All the Credits You May Be Eligible For
Going green, for example, can qualify you for tax credits. This can include installing solar panels on your home or installing new windows, doors, or insulation. If you or a dependent attended school, you can also take advantage of educational tax credits. Child care tax credits are another significant credit.
5. Donate to Charity
It is well-known that charitable contributions can also be deducted on your taxes. Donations do not have to be financial in nature. Old books, toys, clothes, furniture, and other items you no longer need can be donated and their value written off on your taxes. Certain volunteer efforts can also be tax-deductible, such as travel expenses to an event where you represented a charity.
A qualified tax professional can help you get the most out of your tax return by asking all the right questions and taking your entire situation into account. VTax makes the process easier. We give you the option of having your taxes conveniently prepared anywhere, as well as the assurance that your taxes are being completed by credentialed tax professionals. Learn more about VTax and find out how we can save you money on taxes!