If you want to reduce your tax bill, lowering your taxable income is an effective strategy. However, this doesn't mean you have to earn less money. Certain deductions are available to decrease the amount you claim, so learn more about these below to ensure you're ready for tax preparation.
How to Reduce Your Tax Bill
1. Max Out Your Retirement
When you put money into a retirement account, such as a 401(k), that money is generally not included in your taxable income. Instead, you're taxed on it when you take it out of the account after retirement. If you have an employer-sponsored plan, you should be able to contribute up to $19,500, or $26,000 for those over 50. If you don't have a plan through an employer, you can open a traditional IRA and contribute up to $6,000, or $7,000 if you're over 50.
2. Donate to Charity
Charitable donations are also tax-deductible. If you already support certain causes throughout the year, ask for a receipt or proof of donation so you can claim those contributions and lower your taxable income. Keep in mind that donations don't always have to be monetary. You can also donate goods, such as clothing or vehicles, and claim the value.
3. Claim Losses
For those who invest in the stock market or run business ventures, losses may balance out the earnings on your income tax return. If you run or started a business this year, be sure to deduct supplies, office space, and anything else you spent money on. If you bought any stocks or made investments that didn't work out, you can also sell those items at a loss and claim the amount you spent to lower your income by that amount.
If you need help with tax preparation, contact America’s Favorite Insurance & Tax. Based in Desoto, TX, this company offers tax services to customers throughout the U.S. Their experienced consultants can help you optimize your income tax return to maximize your refund or limit payments. Visit their website to learn more about their tax preparation services, or call (972) 662-8221 to request a free quote today.
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