They say that death and taxes are the only two inevitables in life. If that’s the case, then we’re certainly not running short on the latter.
Last year, the IRS enjoyed a bumper year, collecting a record-high of more than $4 trillion in gross taxes from the American people, you included. While tax is unavoidable, how and what you pay is up to you.
Check out these essential tax tips to save money of your money and make the most of the incentives that Uncle Sam has to offer.
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1. Max Out Your Retirement
If you want to save money, you should contribute more to your retirement. By maxing out your IRA, you can enjoy more money in retirement and lower your taxable income. Over a certain threshold, contributions are tax deductible.
You can also convert your traditional IRA to a Roth IRA and avoid being hit with federal income taxes, as long as you meet certain terms and conditions.
There are plenty of rules in the tax system to help you build a more secure feature, so take advantage of them.
2. Deduct Your Debt
Many types of debt are tax-deductible, meaning that you can meet your debt obligations while paying much less overall out of your own pocket.
For example, you can have up to $2500 a year of student loan payments deducted from your tax bill. On top of this, you can also deduct a portion of all medical expenses that are not covered by your insurance from your taxes.
Always check with a tax advisor to see how your debts can lower your burden when tax season rolls around.
3. Use Self-Employment Exemptions
If you’re self-employed, you probably already know a thing or two about the importance of money management. However, you might not know that a staggering range of business expenses can be deducted from your tax bill.
There is a general “self-employment” tax deduction. Then you have home office and business phone bill tax deductions. Rideshare workers can deduct vehicle expenses from their tax bills. This list goes on.
4. Fill Out for Free
No one wants to file taxes, but it doesn’t have to be a stressful or overly complex process. If you don’t want to pay an accountant who can continue filing taxes on your behalf, there are other options.
For example, if you earn less than $72,000 a year, you can use the free auto-filing software from the IRS to get your tax returns completed quickly and on time.
5. If Things Go South, Call a Lawyer
Finally, it is essential that you have a plan for if and when things go wrong. Maybe you forgot to file your taxes. Maybe there is an egregious error on your tax returns, or the IRS is pursuing massive repayment from you that you cannot afford.
If this is the case, you can consult a lawyer that specializes in, say, late or unfiled taxes. Trust us, getting a lawyer to deal with the IRS on your behalf is nearly always the smartest choice.
Did You Find These Tax Tips Helpful?
Taxes might not be anyone’s idea of a good time, but they are a necessity. With the right taxes, you can start to see tax season as less of a burden and more of an opportunity.
A little financial know-how is how you turn tax season into a chance to save money, lower your debts, and build a more secure future.
For more essential financial planning tips, we have got you covered. You can consult our dedicated Business pages for relevant insights that can help you boost your bottom line.