Probably nobody on this planet would object to saving some money. There are pretty simple ways that most people now about, such as using coupons, which are easily available on such websites as Discountrue.com where you should find all of the most popular shops including Kohl’s as well as a number of less-known but great stores. However, not many realise how you can save on your taxes. It has actually become more important than ever before in the Age of the Affordable Care Act and impending changes in Social Security that may eliminate Medicare. The following suggestions can help anyone save on taxes regardless of what their income is.
Max Out Your 401(k) or IRA
If you do not participate in an employer’s 401(k) program then, start. If you do not have an IRA, open one. You can reduce your tax burden by 15 to 45 percent of $17,500 if you place that much in a 401(k). People who are over 50 can save more on taxes because they are allowed to put $23,000 in a 401(k).
The limits for contribution to an IRA are $5,500 if you are under 50 years of age and $6,500 if you are 50 or older. Consider a Roth IRA because you pay taxes on the deposit but pay no taxes when you withdraw money and you can withdraw before retirement age without a tax penalty.
Include all business deductions
You need to keep a journal of any money that you spent for work that was not reimbursed by your employer. Deductions can include books, magazines, equipment, or anything work related including the part of your home that you use for work. You can prorate your electric bill, phone bill, cellphone bill, Internet service, and any other household expense based on the amount of time that you used the utility for work.
Keep track of the mileage that you drive for work. This can include mileage for going to and from work in some instances. The deduction per mile is $0.58 so if you travel a lot using your own vehicle the deduction can be substantial.
All job hunting expenses are deductible including meals, postage, resume preparation, mileage, motel costs and any costs not reimbursed by a potential new employer. The costs for moving more than 50 miles for a new job are all deductible.
Use your children
Every child is a $1,000 deduction. You can give up to $13,000 to each of your children without paying taxes. Both you and your spouse can give the same amount to each child so you get a tax break of $26,000 per child.
If you plan for your children to go to college, then open and fund a 529 plan to the maximum because as long as the money is used for college expenses you never pay taxes on it.
Do not overlook medical expenses
Your health insurance should cover the lion’s share, but anything you end up having to pay out of pocket is deductible. The mileage that you drive to any doctor, dentist, or optometrist is deductible at $0.58 per mile.
Become a tax nit picker
Alimony is deductible. Funding a flexible health benefits plan can save keep you from paying taxes on $2,500 of your income. Change your W4 each year to reflect then true amount of tax you paid the previous year because you get more income. Do not forget mortgage expenses are deductible. Child care costs can be deducted up to $5,000. See if you qualify for the earned income tax credit. Deduct all charitable contributions including the costs of anything you cooked for a charity and the mileage that you drove to do charity work.
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