At tax time, everyone is looking for ways to reduce their tax liability and keep more of their hard-earned income. It’s possible to reduce your liability without having your return red-flagged by the IRS. The following are just some of the common ways to do so.
Business Expenses
If you own a small business, always hire a professional to do your taxes. There are a variety of deductions you may be eligible to take, but may not take advantage of for fear of triggering an audit. A professional tax preparer will be cognizant of the types of expenses that you can claim and the documentation you’ll need.
Charity
Charitable donations can be written off if they exceed your standard deduction and you itemize your taxes. You’ll need receipts to prove the contribution and they should be realistic.
College
You can contribute to a 529 account for yourself or grandchildren, nieces and nephews. You can’t deduct a 529 on federal taxes, but it can provide savings on state tax returns, depending upon the state in which you live. You can also deduct $2,000 in educational expenses through the Lifetime Learning Credit, even if you aren’t working toward a degree and your income isn’t too high.
Health Insurance
The federal government will no longer penalize you financially for not having insurance, but many states have initiated their own fines in the form of a tax for not having a qualifying healthcare plan. The rules vary on what a qualifying health plan means, so it’s best to consult with a professional and get covered.
Retirement Funds
Contribute as much as you can to an IRA or 401k account. You can contribute $6,000 to an IRA or $19,000 to a 401k. Additional amounts can be contributed if you’re over 50.
At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs. We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!