Its Tax time again. Try these tips to pay less in Taxes.
Follow these few tips to keep some of your hard earned cash in your pocket. And they are totally above board, legal, on the ups. Call it what you want, but try these few tips to pay less in taxes.
When it comes down to it? Its about your TAXABLE income. Not the 50k a year income you were hired with. Its after all your deductions and write offs and retirements are paid. Its what you actually live on.
Here are some examples of places to sock that money away, most with automatic withdraws from your check before you see it.
Reduce Your Taxable Income
First..is to contribute to a tax-deferred retirement savings plan, like your company’s 401(k) plan.
Wages you defer to a 401(k) don’t count toward your taxable income for the year you make the contribution, though they will be taxed when you make withdrawals later. The theory is you will make less when you are retired and need this money, so your taxable income will be less, paying less in taxes.
That means you’ll get a tax break now… and you’ll be growing nest egg and setting yourself up for a comfortable retirement.
Second..is to contribute to an IRA
Even if you already have a retirement savings account at work, like a 401(k) or a 457(b), you can still open and contribute to a traditional IRA (Individual Retirement Account) — you just need to have earned taxable income and not yet have reached age 70 ½.
Just like that company-sponsored retirement plan we were talking about, the funds you contribute to your IRA don’t count toward your taxable income unless you contribute to a Roth IRA which you contribute after taxes today, but as it grows you do not pay taxes when you withdraw.
For 2019, you can contribute up to $6,000 to an IRA, or $7,000 if you’re over the age of 50.
You have until tax day to max out your contribution for the previous calendar year, so you have until April 15, 2020 to make your 2019 IRA contribution. Questions? The IRS Website has your answers.
Third..is to contribute to a Health Savings Plan
A Health Savings Account (HSA), is a tax-exempt option if your health care plan has a high deductible. Not only are your contributions deductible, but withdrawals aren’t taxed, either, as long as they’re used for qualified medical expenses.
For 2019, you can contribute up to $3,500 to an HSA if you have individual coverage, and up to $7,000 if your high-deductible health care plan (HDHP) covers a family.
Fourth..is to contribute to a College Fund
According to U.S. News & World Report, average costs range from $9,716 to $35,676 for a single year of education. That is a ton of money and if you have multiple kids, its all about planning ahead.
A 529 plan is an investment account specifically built for educational savings. You can use it to pay for your kids’ college tuition — or even to send yourself or your spouse to school. The exact tax benefits vary by state, and the contributions aren’t deductible on your federal return.
Fifth..is to adjust your tax withholding
If you work for an employer, you’ve filed a W-4 — which is the document where you specify how much of your wages should be withheld for taxes. If you find yourself owing taxes, you have not had your employer withhold enough. You will want to adjust them slightly so you will not have the same problem next year.
Related: Chandler Offers Free Tax Prep
