Reducing Taxable Income
Taxation is as old as currency itself. However, one element of taxation that has changed significantly in the modern era are the various ways we can reduce our taxable income. It makes our wallets a little heavier and life that much easier.
But considering the complex web that the modern taxation policy has become, saving on taxes is not easy. It requires an astute understanding of different tax policies and laws. That’s why tax experts are so highly revered and always in-demand.
If you are looking for some tips on how to reduce your taxable income, this blog will certainly help you. Follow the tips and strategies we share below and save more on your taxable income.
#1. Fill Out Your W-4 Wisely
More often than not, employees end up taking a lower paycheck because they are not filing their W-4 form accurately. They end up allowing their employers to withhold and transfer a big chunk of their paycheck to the IRS.
The rule of the thumb says that you claim more to save more on your W-4. But at times you may have to do the opposite as well. You can update your W-4 anytime and should consult an expert to determine which method is right for you.
#2. Invest in a Retirement Account
Isn’t it great to save on your taxable income while also saving for a dream retirement? That’s exactly what a retirement account does for you. The federal tax law approves a range of retirement plans that are eligible for deductions. As a taxpayer, you should make the most of these plans.
#3. Open a Health Savings Account
If there are any lessons that we can take forward from the year 2020, one is certainly that we need to be prepared for a health crisis. If anything, health security should be on top of our priority list. And there is no reason to not do it when you can open a health savings account and use it to reduce your taxable income.
#4. Claim Business Deductions
If you are self-employed then you can claim a long list of deductions. For instance, you can write off your health insurance premium; office expenses (e.g. rent, utilities); car expenses and mileage; and many other bills as business expenses. Moreover, there are a variety of retirement savings plans that self-employed individuals can take advantage of to lower their taxable income considerably.
#5. Don’t Forget Tax Credits
Tax credits are simply must-use if you want to save on your tax bills. They reduce tax liabilities dollar-for-dollar which means they are applied directly to the tax amount, unlike deductions that apply to the total income. If you use tax credits wisely your net tax liabilities may even be reduced to zero.
Want To Reduce Your Taxable Income?
Benefit Tax Group is here to help you. We know how complex and confusing the tax laws and policies can be. That’s why we make sure that you get the best tax consultation. We are a group of industry professionals who make sure that you never have to pay extra and you always save more.
If you want to get a free consultation explaining what we can do for you, please call us now at (800) 381-8816. You can also fill out our contact form.