Everyone wants to save some money on their taxes. Many people wait until their tax returns are being prepared to scramble for ways to save. By focusing a keen eye on your tax situation throughout the fiscal year, savings are much easier to take advantage of. Below are five uncomplicated ways you can lower your tax bill or increase your return.
The cost of your higher education can help you save on taxes. Student loan interest deductions and student tax credits may apply to you if you are enrolled in enough credit hours to qualify. Keep careful track of college expenses in order to claim these credits.
Save for Retirement
Not only can a retirement savings plan protect your future lifestyle, it can help you save on your taxes. In many cases, contributions made to a retirement savings or investment account, like a 401K, will not count toward your taxable income. A lower taxable income means a lesser tax obligation. Another tax benefit of investing in a retirement fund is the tax-free growth of the invested money. Unlike other investments, dividend profits from retirement investments do not need to be claimed on income taxes.
Claim Correct Withholding
A surprising number of people do not claim the right withholding on their W-4 forms from their employer. New-hire paperwork packets can be tedious and it is easy to breeze through a W-4, filling in the same withholding number you always have. If you find yourself with a large income tax bill instead of a return, you may have claimed an incorrect withholding level. Check your W-4 and consider increasing your withholding.
Home Equity Loan
The interest paid on a home equity loan, like that of a mortgage, can be claimed as a deduction. For this reason a home equity loan can be more cost effective than paying for a big purchase on a credit card. Credit card interest is seen by the IRS as part of your consumer debt and can never be claimed on your income tax return as a deduction.
Flexible Savings Account
Another way to lower taxable income and your income tax obligation is to have a portion of your paycheck placed into a flexible savings account. Employers who offer medical insurance benefits often have flex accounts available for employees to pay for medical expenses that aren’t covered.
These five strategies can help you save on your taxes. By planning ahead you can save a lot of money when tax season comes around. Organization and attentiveness go a long way toward lowering your yearly tax obligations.
Teresa has over 15 years of experience helping others who are in need of IRS tax help. If the IRS is withholding money from your paycheck, Teresa can help stop IRS wage garnishments and get you out of debt.
Taxes: 5 Easy Ways to Save by Steve