When it comes to the savings on your tax bill; the first thing that you need to do is to learn about the tax laws to take every tax deduction to which you’re entitled. Believe me, this advice will help you save thousands of dollars.
If you want to get the detailed information, you can visit the IRS website that will help you further understand the following tax credits and deductions. If you spend some time each year on keeping you aware of the tax law, you’ll definitely save a lot. Here, in this article, I’ve compiled a list of 10 easy ways to cut your tax bill, so you can serve your finances well.
1. Retirement Account Contributions
It’s the first tax reduction tool that mainly serves two purposes. Apart from the Roth personal retirement account, almost all contributions will enable you to deduct the amount paid from your taxable income. It will eventually decrease your total tax income and these funds grow tax-free until retirement. This plan will alone secure your retirement if you start early.
2. Health Saving Account Contributions
If you have a high deductible medical plan, then the best way is to contribute to a health saving account. In this way, your unused medical contributions will overturn for an indefinite period and grow tax-free like other assets in your retirement account.
3. Combining A Vacation With A Business Trip
Another way to cut your tax bills is by merging a holiday trip with a business trip. This way, you can decrease the cost spent on vacation by subtracting the amount of reimbursed business expenses (including the airfare and the hotel payment) from the total bill.
4. Taking Home Office Deductions
If you have a side business, then you are eligible to get the home office deductions. In this way, you can cut the % of your home used for business under the law (Schedule C, 1040). For instance, you’re using the guest room exclusively as a home office, which makes up 1/3 of the entire living space, then you can deduct 1/3 of the utility fees and rent for your home office.
5. Self Employed
If you’re self-employed (full-time/part-time), then you’re automatically eligible for tax reduction scores. Some of these expenses include: advertising, website fees, business vehicle mileage, shipping, % of home internet bills used for business, office supplies, memberships, publications, business trips and any other cost incurred to run your business.
6. Social Security Tax
If you’re self-employed and pay 100% of the social security taxes owed, 15.3% can wave off 50% of the taxes paid. And to claim the tax deduction, you don’t even need to itemize.
7. Reimbursed Vehicle Expenses
This tax break is often overlooked. If you’re traveling to the satellite office and using your own vehicle, then you can wave off mileage costs. But you aren’t entitled to commuting costs deductions.
8. The Lifetime Learning Credit
It’s another great tool for adults to boost up their education and training. This credit will give you a max of $2000/year, which is 20% if you have spent $10000 on your high school education program. You can use this money for your educational expenses.
9. Earned Incomes Tax Credit
When it comes to the earned income tax credit, it will lower down the overall tax bill, especially for lower and moderate income families.
10. State Sales Tax
It’s another type of tax break in which itemizers will get the opportunity to either wave off the state sales or state income taxes paid. It’s a great advantage for those who are living in a state without income taxes and looking for a tax-free gold.
Above are some simple tips on how you can cut more on your taxes by understanding the laws and simple loopholes which can save you lots of dollars on your tax bill.
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