While there is no way of getting out of paying taxes altogether, there are strategies for reducing the amount of taxes owed. By putting some of these strategies in place and putting some effort into planning for taxes, you can see a significant difference when tax time rolls around next year.
It’s important to note that everyone’s situation is different and there may be some necessary tweaks that need to be made to these strategies to ensure they work for you. With that said, here are some ideas and suggestions on what you can do now to lower your taxes for next year:
Contribute to Retirement
Keep in mind that, when it comes to taxes, it’s all about your taxable income and not necessarily your gross income. This is one reason why so many accountants and financial advisers recommend making regular contributions to a retirement plan. The money you put towards a retirement plan such as a traditional IRA is a pre-tax contribution that lowers your total taxable income. This means you will owe less in income tax when you file.
There are a couple of reasons why donating to a charity is good for reducing your tax bill. First of all, you don’t have to donate money in order to claim a deduction. You can donate household items such as toys, books, and clothes to charitable organizations and still claim a deduction. Secondly, expenses that might stem from any volunteer work you provide is also deductible. This might include travel costs to and from a charitable event you are involved in or purchasing and donating office supplies and other materials to a charity.
Home Office Deductions
If you work from home and use a part of your home as an office for your business, you may be eligible for a home office tax deduction. You can deduct $5 per square foot up to 300 square feet of the area you use for your home office from your tax bill. That’s a potential of $1500.
Flexible Spending Accounts
Many employers offer a benefit that allows their employees to lower their tax bill by putting money towards expenses such as dependent care or medical bills. You essentially divert part of your salary to a separate account, which you can then use for paying for health care needs. This way, you avoid both income and Social Security tax on the money, saving you 20 to 35 percent or more. The maximum you can contribute to a health savings account is $2,500.
Need More Ways To Lower Taxes
For more ways to lower taxes and ensure you get the right tax deductions when you file next, be sure to give Hacker Accounting a call at 602-375-5251.