5 Ways to Save on Taxes
Taxes are a necessary evil – you may not like it, but you’ll have to pay. While there’s no easy way to get around paying taxes, most people don’t realize that there are ways to get more tax savings.
There are some smart ways to make sure that you’re not overpaying and are getting the most out of every dollar. The following are some tips on how you could lower your tax liability.
Have All Your Documents With You
Before you file, ensure that you collect all important documents, so you don’t forget anything. Put together your checkbook registers. If you are using computer software or a web-based service for your taxes, print off the totals from each register for the year so that you can attach them to your return when you file.
Organize the Previous Year’s Records
Have the previous year’s tax information available—such as W-2 forms and 1099s. Some documents will be required (for example, if you are claiming a dependent), while others may be helpful depending on your situation (for example, investment records can help lower taxable income).
Consider Above-The-Line Deductions
The government allows a number of above-the-line deductions in order to adjust your total income. The specific, most common deductions include IRA contributions and health savings account contributions. The above-the-line deduction aids the taxpayer in lowering his or her taxable income, which is good news if you pay taxes at a higher rate.
Check for Most-Missed Credits
The earned income tax credit (EITC) is a federal benefit for low- to moderate-income workers. It’s like a tax refund, and it could help you with your mortgage and other necessities or even become a small boost in your monthly income. Work with a tax professional to make sure you’re taking full advantage of all the credits and deductions that you’re entitled to so you don’t lose any money.
Remember Tax Deductions for Dependents
Ensure that every tax deduction and credit you deserve is claimed. If you are a parent, or if you are supporting a relative – or even a boyfriend or girlfriend – you may be able to claim that person as your dependent on your taxes. There are many benefits to claiming dependents; not only do they reduce your taxable income, but tax credits and deductions can lower the amount of taxes you pay.