Who doesn’t love tax savings? Tax has become an integral part of our financial outlay. It is always good to save a few bucks towards the end of the year. Moreover, it leads to better habits pertaining to tax planning. It becomes even more important as your income grows. Earning six-figures is great, but you don’t want to spend a considerable portion towards taxes. So, you must implement strategies that help you minimize tax liability in Placentia, CA.
Hence, here are top 7 tips to maximize your tax savings at the end of the year.
7 Tips To Maximize Your Tax Savings At The End Of The Year
1: Tax Deductions
The IRS allows certain deductions from your taxable income. The most common are property taxes. Similarly, travel expenses for self-employed individuals and contributions towards health insurance are deductible for tax purposes.
Make sure to know all applicable deductions in your case, and take advantage of them.
Overall, these allowable deductions may help to considerably reduce your taxable income towards the year-end.
2: Tax Credits
Another common way of reducing tax liabilities is to take advantage of tax credits. Earned Income Tax Credits (EITC) are more commonly used.
EITC is applicable where you have low or moderate income. However, many people are unaware of the Plug-in Electric Drive Vehicle Credit.
Individuals who purchased an EV after 16th Aug, 2022 are qualified for this credit. Similarly, some other form of tax credits may be available in your particular case. Make sure to explore this avenue.
3: Charitable Donations
What’s better than helping the underprivileged and earning tax benefits at the same time. If you contribute to eligible charitable causes, you are likely to receive tax benefits.
Normally, for tax purposes, contributions up to 50% of your gross income is eligible for allowed deduction.
It means that your taxable income is reduced by the amount you contributed towards charitable causes. However, due diligence is required as donations should be made only to qualified charities. For example, political contributions do not fall under this ambit.
4: Capital Losses
We all love gains. However, capital losses may come handy in some cases as well. At present, up to $3,000 capital losses can be carried forward to claim tax benefits. While you lost your money, you can use it to recover some of the amount in the form of tax deductions.
5: Recheck Your W-4
A majority of your tax information may be coming from W-4. An incorrect W-4 filling can result in an unexpected increase in the tax bill. Ensuring that correct info is being provided in W-4, you may get certain refunds as well.
6: Misc. Office Expenses
It is common for small businesses to not keep track of miscellaneous office expenses. This is especially true if you are working from home.
Small expenses like printer toner, stationery and utilities can accumulate to a huge sum by the year end.
Make sure you keep track of these expenses along with receipts/ evidence. Again, these expenses can combine to dramatically reduce your taxable income for the year.
7: Consult a Tax Professional
Last but not the least, it is always beneficial to consult a tax expert. A qualified tax professional will help you maximize tax savings by using above mentioned (and many other) strategies. While you can use the above strategies on your own, an expert shall help you take maximum benefit of these strategies.
This is especially true if you are earning a handsome income, since stakes are relatively high here. Tax savings could be far more than the fees paid to a tax consultant.
Make sure to weigh the option, and go for a professional tax consultant.
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Zee Maq is a content writer who specializes in writing business and finance content. She has nine years of experience and loves to provide problem-solving content to help people tackle challenges in their everyday lives.