Paying your hard-earned money to the government sounds painful, whether you run a business, operate as a freelancer, or work as a full-time employee. Luckily, you can explore ways to cut down your tax bills and retain more of your income for yourself. The best part is that these measures are legit, so you need not stress about landing up with audits and penalties. You only need to choose wisely, and saving taxes can be a breeze. Here are some expert-recommended money-savvy tips to lower your IRS bills.
Leverage tax credits
People often forget to leverage tax credits only because of a lack of awareness. But credits are the best way to lower your bill as they do not just reduce your taxable income but also cut down the tax you owe. The good thing is that many tax credits are available, so you must not miss out on the benefits you are entitled to. An expert can guide you on the credits you can pick legitimately.
Save for retirement
Another easy way to save on taxes is by contributing to an Individual Retirement Account (IRA). You can choose a traditional IRA, a Roth IRA, or a company-sponsored 401(k) plan for this purpose. Retirement savings are money-savvy because they enable you to cut your tax payable today and save up for your golden years in the long run. The yearly amounts you set aside in these plans can lead to the significant growth that ensures a comfortable retirement.
Maximize your business expenses
The best way business owners and self-employed taxpayers can reduce their tax burden are by maximizing their expenses. Luckily, you are entitled to work expense tax deductions such as office rent, home office expenses, business insurance, work-related travel expenses, and the cost of acquiring and maintaining a vehicle for company use. These expenses lower your net profit and taxable income. Remember to claim as many business expense deductions as possible.
Contribute to HSA
You can lower your taxable income by contributing to Health Savings Accounts (HSA). A health savings account (HSA) enables you to set aside money for unforeseen medical situations in the future. The amount you pay for the account is tax-free. You can use it as a viable measure to save for retirement, if you do not end up needing the money for medical treatment.
Make charitable contributions
Another great way to lower your tax bills is by making charitable contributions. You can donate cash, household items, or appreciated stocks to a qualifying charitable organization. You can even claim expenses incurred while volunteering as a deductible. But remember to check the organization you choose is a qualified nonprofit entity. Also, itemize your deductions to get the benefit of charitable contributions.
Taxes can eat up your income and profits, but avoiding them is not a choice. The last thing you want is to face a penalty or audit for failing to pay. But there are legit ways to cut the bills without breaking the law. Try these ideas to save on taxes without getting into trouble.