Tax reduction strategies
Just like the air that we breathe, the payment of taxes is an inevitable occurrence. As much as you may hate the idea of having a percentage of your income taken away by the IRS, there’s little you can do to stop it.
Tax evasion is always a bad idea because it is illegal and can attract a lot of unpleasant penalties, but there are some moves you can make to legally pay less than the amount that you owe in taxes. One major way to legally pay less than the amount that you owe in taxes is by reducing your taxable income. This simply means reducing the percentage of your income that the IRS can touch. Contact us to discuss your tax situation and for expert advice on what strategies are best for you.
Below are a few tips on how to reduce taxable income:
- Contribute to a retirement plan through your work: You can contribute huge sums of money to your 401-K or 403-B. This is a huge way to pay less than you originally would have in taxes. Take note, however, that you will have to pay taxes for that money when you take it out in retirement if it’s a traditional 401-K.
Not able to max out your 401-K? That is normal. You should consider increasing your contribution by at least 1 percent. You barely will feel the strain on your paycheck and it’s a great way to reduce your taxable income for this year.
- Contribute to an IRA: This is an option for you in you are not eligible to contribute to a retirement plan through your work. You may still be able to contribute to a traditional or Roth IRA even if you have contributed to a retirement plan. A Roth IRA can be a great financial decision but it doesn’t lower your tax liability. Think about whether or not it is best to get the benefits now or wait to be able to take your money out in retirement tax-free.
A big perk of the IRA is that you have until the filing deadline to actually contribute and it is a great way to reduce taxable income.
- Charitable giving: This is a good life practice and can also help lower your tax liability. You must donate to a charity that is recognized by the IRS which is usually noted by a 501C3 status.
- Get a tax deduction by saving for your child’s education expenses: 529 plans are a great way for parents to be able to save for their children’s future educational expenses. However, you don’t get a federal tax deduction.
- Check your employee benefits to be sure you’re not missing any possible ways to lower your taxes: You may be eligible to contribute to a health savings fund or flexible account. The HSA is a great way for you to save for medical expenses.
- Donate and re-purchase: Beyond the immediate tax benefits, giving to charity has other intrinsic rewards. Apart from giving cash, another way you can maximize your charitable giving deductions is by giving appreciated securities. After donating, you can buy back the shares at a better value than when you first got them, and if you sell the share in the future, the capital gain tax liability will be smaller.
Looking for savvy ways to reduce your tax liability? Let us put our knowledge and expertise to work on your behalf.
We are a tax relief firm dedicated to giving you the best results regarding resolving your tax debts. Our team of qualified professionals is available round the clock to provide you with the assistance you need. Contact us now at 888-585-8629 or 617-430-4674 or send us an email at [email protected].
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