7 Ideas You Can Use to Save on Your Taxes is a post originally published on: Everything Finance - Everything Finance - Its all about Money!
Taxes are an interesting part of life.
While it would be hard to argue for the elimination of taxes, as our country tends to run on them, that large slice of money that comes out of your paycheck each month is usually painful.
When I was working a traditional job, I couldn’t help but calculate how much more I’d be making if it weren’t for taxes.
Still, they’re a fact of life, and as an American citizen, it’s my duty to faithfully pay them every year.
However, that doesn’t mean that there aren’t ways to save money on your taxes.
As the end of the year approaches and you begin to prepare your taxes and your return, consider using these 7 ideas to save on your taxes.
1. Become More Charitable
If we’re being honest here, we should really give to charity out of the goodness of our hearts. Nonetheless, being charitable with your money is also a great way to cut your Tax Bill.
Find an organization or cause that is dear to your heart (one that is recognized by the IRS), and designate an amount to donate. You will have to itemize the donation in order to get it written off, so be sure to get a receipt or some sort of record from the charity you donated to.
Furthermore, if you opt to donate goods instead, know that as long as the clothes or items are in good condition or new, you should be able to deduct those as well. At the end of the day, you’ll be doing something generous for someone else, and you’ll receive the advantage of deducting it from your taxes.
2. Utilize Your Kids
Okay, this one in particular sounds a little odd, but you’d be surprised by the fact that having children provides you with ways to save on your taxes. It’s no secret that having kids is a costly aspect of life, and thankfully the government recognizes that and gives you some income back.
The tax code provides you with a credit if you spend on child care among the other benefits parents receive. Furthermore, you can receive credit for the mere fact that you have a child, and you may be able to count each one depending on your household. Plus, if you’re required to pay alimony, those payments are deductible as well.
3. Save for the Future
Contributing money to your retirement is one surefire way to save on your taxes. The amount you pay in taxes is based on the income you bring home, however, you have the ability to deposit part of your income into tax-deductible retirement accounts, such as a 401(k), before your paycheck is taxed.
By choosing to increase your retirement contributions, you’ll save some of your income from going toward your tax bill. Although this might not seem like you’re really saving money in the moment, you’ll be glad you did as your retirement fund steadily increases.
Want to save money on your taxes this year? Try these 7 ideas
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4. Go Green
Our world today is constantly discussing ways in which we can make our society more energy efficient and healthier for our planet. Apart from protecting the earth we live on, utilizing ways to make your home more energy efficient also gives you a break in your taxes.
Whether you install new doors and windows or opt for more efficient heating and cooling systems, the government will provide you with a tax credit. You can also look into other energy sources and savers, such as solar panels, as they can be eligible for a credit as well.
5. Invest in Education
The decision to further your education is a rewarding one, however, it’s also costly. Thankfully, if you’re putting money towards tuition or saving for your children’s college education, the amount is usually tax deductible.
Furthermore, if you decide to take college courses throughout your life, you may qualify for tax credits for each class you take depending on your income level. Just remember, as long as your money goes towards higher education, it’s usually tax-free. Of course, you’ll want to look further into your state’s tax code to see how your state government treats college savings and tuition.
6. Check Your Losses
While I’m not petitioning you to invest your money unwisely, any losses you experienced can be used to your advantage when it comes to taxes. If you had investment gains, you’ll have to pay tax on that money, but you can avoid this and offset gains by pairing them with your investment losses.
If your investments lost you more than they benefited you, you can also offset your monthly income, up to a certain amount, to account for those losses. Still, investing wisely tends to be better than saving on your taxes, so continue to do your research and invest well.
7. Become an Entrepreneur
While this one may not be for everyone, if you are contemplating or have decided to start your own business, you’ll find that you can save on your taxes. Businesses have more control when it comes to paying taxes.
Instead of counting all the money your business makes as income, you can opt to put it back into the company and save that income from your tax bill. Moreover, businesses have the ability to count various costs and purchases as necessary expenses, gaining the ability to write them off.
If this is a route you decide to take, there are tax professionals out there to assist small businesses when learning tax rules that apply to them. But beware, when you are self-employed, you won’t have a portion of your taxes paid by your employer anymore, so your tax bill may actually increase depending on how much money you earn.
Before trying any of these options, it’s important to do your research and look into your state’s tax rules to see what applies to you. However, depending on your household, taxes tend to get increasingly complicated, so if you find yourself wondering how you can save, it might also be a good option to hire a professional to help you save all you can.
Do you know of any other ways to save on your taxes? Have you saved on your taxes using any of these strategies?