Everyone wants to cut their tax bill and reduce their taxes. There are ways to accomplish those goals of which you may not be aware. The following are just some of the ways that you can cut your tax bill.
401k
The IRS doesn’t tax contributions to an IRA, making them an ideal way to reduce taxable income. Up to $19, 500 can be placed in an IRA and people 50 and over can add an extra $6,500 to that amount.
Education
You can establish an educational savings fund and deduct your contributions on your federal tax return. Contributing to the state’s 529 prepaid tuition or educational savings plan may also be deductible on state taxes. Be aware that the gift tax may apply if it exceeds $15,000 to a single beneficiary.
FSA
A flexible spending account for medical and dental expenses can aid in lowering your tax bill. There’s a limit of $2,750 in contributions. If you have a dependent care FSA account for child care expenses, the IRS will exclude contributions of up to $5,000. It may also cover eldercare expenses. Check with a tax professional to be sure.
HSA
Contributing to a health savings account can be beneficial if you have a high-deductible insurance plan. The plan parameters change each year and not everyone may qualify for the deduction, but they also have investment potential. It’s not a good option for everyone, so check with a tax professional first.
IRAs
There are standard/traditional IRAs and Roth IRAs. You might be limited on how much you can contribute or unable to deduct contributions under certain circumstances, depending upon which type you have. It’s best to discuss the situation with a tax professional or accountant.
Tax Calculators
There are numerous types of tax calculators that can help you save. There are calculators to estimate your taxes and refund to more complex calculators for determining capital gain taxes. Knowing where you stand financially is an effective tool for managing your finances and reducing tax liability.
W4s
Your W4s tells your employer how much to deduct from your check each week. If you had to pay in a sizable amount last year, increase your withholdings. The opposite is true if you got a large refund the previous year. You can change the withholdings on your W4 any time you want.
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!