Here are some extremely effective and smart methods to minimize your tax bill for this year.
1. Start a business – Being an entrepreneur can radically improve your tax situation; as a business owner you can take more control over how you’ll pay your taxes. You’ve the option to keep more dollars in your company rather than drawing it down as you income. You can also count specific expenses. A tax professional may help you navigate the nitty-gritty of Internal Revenue Service (IRS) regulations on qualified expenses that are quite lengthy.
2. Having children can help – The tax rules offer a number of benefits to the parents. Such benefits may include the child tax credit, credit for childcare costs and ability to count more number of dependants in your family. Alimony payments can also allow you to take advantage of tax deductible.
3. Maintain long-term mortgage – Since interest payments toward mortgage are tax deductible, you can benefit by maintaining your mortgage as long as feasible as opposed to paying the mortgage early. All you need to balance that tax benefits against additional interest incurred. However, paying your debt off, if you have enough savings to do that surely gives you mental satisfaction.
4. Check for earned income tax credit – The earned income tax credit applicable to low and moderate income groups, can give you notable amount of credit. So check whether your income makes you eligible for such a tax credit. You can get help from an income tax consultant in Florida, being a Florida resident, to help you in this regard.
5. Save for retirement – If you voluntarily take lower amount of paycheck to your home by maximizing retirement contributions (though it’s quite painful in short-term), you’d have two useful benefits. First, you can increase retirement savings and the second, you minimize tax burden. Money funneled into different kinds of retirement accounts like IRAs and 401 (k) would allow you to enjoy tax deduction, within limit.
6. Keep track of medical expenses – Some healthcare-related expenses such as supplies like bandages and breast pumps, acupuncture are tax deductible. For a comprehensive list of such qualified items, you can visit the official website of IRS. Make sure you preserve all the receipts.
7. Be energy efficient – Our federal government encourages valued taxpayers to make their houses more energy-efficient by providing credits for different wise moves like insulation installation, new doors and windows, installing heating and cooling systems etc. Some alternative energy sources such as a solar panel are also qualified for tax credits.
8. Put dollars into college savings – Only a very few parents create 529 college savings account for their children and so they miss getting the tax benefits by not letting the money grow tax free. As long as amount goes toward tuition fees, you don’t need to pay taxes on that income.
9. Look for useless securities – If you own a security that has gone completely worthless, you can deduct the loss.
Amit Singh is a founder of Theinternationalfinance.com he share his immense knowledge of Finance in this blog.