Tax season is just around the corner and if you haven’t quite wrapped your head around it yet; that’s okay! I’m going to give you some tips and tricks to help you lower your tax bill while you still have time to do so! First things first, you will want to get the help of a qualified accountant. Even though there are all kinds of do-it-yourself programs out there, the easiest (and most accurate) way to ensure you’re getting all your tax breaks is to go to a qualified professional. They will be able to help you with all the secrets, tips and tricks to ensure you’re not paying more than necessary. They can also help with tips on how to lower tax debt and manage complicated tax issues. But before you do that, here are five smart ways to lower this year’s tax bill:
If you are blessed enough to offer support and help to charitable causes, this is a great way to lower your tax bill! Giving to charities gives you the opportunity to collect receipts and claim them on your tax bill. Not everyone knows this, but you are able to claim not only cash gifts but also for contributing donation items of value. Make sure you keep track of everything you donate and chart the value of each item so you can claim it properly.
It may be tempting to inflate the value of your items, but it’s best to just stay honest; no one is going to believe that your clothing donation to the Salvation Army is worth $5000.00, no matter how quality they may be!
It’s most likely that you’ve already started some type of retirement plan. It would be smart for you to consider a tax-advantaged retirement account; something like a 401(k) or IRA. These types of accounts allow you to take deductions for every contribution you make throughout that year. There are limits, as in the 401(k) has a limit of $19,000 or an IRA account has a limit of $6000, but there are exceptions with age and certain other details (your accountant can help you with that). These savings can be quite substantial in lower your tax bill, all the while you’re empowering your future self with a decent retirement plan! It’s a win-win situation!
You probably already have health insurance, but if you don’t, it’s a smart idea to get some. Not only does it come in handy when dealing with medical emergencies or unexpected medical costs, but it absolutely can provide savings on your tax bill. It doesn’t necessarily give you a deduction, but you no longer have to pay the penalty of NOT having health insurance. The details on this can differ from state to state, so be sure to check with your local tax regulations; but in most states, there is a penalty to not having or maintaining valid health coverage for you and your family. Having health insurance is a smart idea anyway, so using it to lower your tax bill is a no brainer!
While we’re talking about health insurance, I may as well let you know about the medical costs deductions you could be making as well. During your year, make sure you keep any documentation concerning medical costs, as you can get a deduction on any unreimbursed, allowable medical expenses if they exceed 10% of your income.
This is one area that you want to keep track of. If the costs you incur throughout the year meet the necessary threshold, you will be able to take advantage of these deductions and save money on your tax bill.
Energy-Efficient Home Improvements
If you plan on doing any renovations on your home, now is the time to ensure that your energy-efficient! That’s right, you get a tax break if the renovations meet certain standards according to the government. The installation of solar panels to power your home, or solar-powered heat pumps (and many other energy-efficient renovations) are qualified for a credit that is equal to as much as 30% of the cost of your home. This could equal huge savings! There is also no credit limit for this tax deduction and is qualifiable on both your primary and secondary home. While doing renovations anyway, you might as well capitalize on the deduction and save yourself some money, while you’re at it!
Tax season can be a very stressful time for everyone, and no one wants to give all their hard-earned money back to the government. If you can pre-plan and make sure you keep all the required documentation, these tips for lowering your tax bill just might give you the break you were looking for!