Tax is one of the certainties in life. But, luckily, it is NOT certain to pay a huge tax bill. There are quite a lot of rules and tricks that you can play with to minimize your tax bill.
But, the problem is that many average Americans don’t pay heed to lower their tax liabilities. You can save thousands of dollars by extensive record-keeping, keeping yourself updated to the law changes, and playing with the rules. So, invest your time and save some dollars.
To help you, here are some ways to decrease your tax bill. But, these are general bits of advice. Only an experienced tax practitioner can tell what will work out the best in your case.
Keep Everything Organized and Documented
Keep a receipt of each dollar you spend throughout the year, especially; when giving charities, having a medical check-up or treatment, buying items for your home offices (in case you’re self-employed), paying fees post-secondary education, etc. So, when the tax season arrives, you don’t have to dig everything out.
Choose the Right Filing Status
It’s a bit tricky but can save you thousands of dollars. Generally, experts advise married couples to file jointly, but not in every case. Sometimes, it is wise to file your tax separately. Similarly, if you’re a single parent or support your parents (who are dependent on you), then IRS may consider you as head of household, helping you save a considerable amount of money.
Check All Possible Deductions and Credits
It is a must-do thing. Look for all possible deductions because they decrease your Adjusted Gross Income, therefore, reducing your tax liability.
Deductions are good, but tax credits are better, especially when they’re refundable. Tax credits are dollar-for-dollar reductions in your tax, so they decrease the bill drastically. Therefore, you must explore all possible deductions and credits.
Check out the most common reductions.
You can make deductions of everything you donate to qualified charities, even in the form of goods and stocks. But, make sure to get a receipt from the organization to claim your deductions.
2. Contributions to Retirement Fund
If you contribute anything to your retirement fund, you can deduct that for your income. The limit for 401(k) and IRA is $6,000, but it exceeds in some cases.
3. Medical Expenditures
If you incurred any medical expenses last year, then you can deduct them. But, only expenses that exceed 7.5% of your AGI are deductible.
Get Tax Services from Professionals
Getting services of tax advisors is the most prudent thing you can do. Tax professionals analyze different aspects of your case and come up with the most profitable strategy. They help you to select the right filing status, make all deductions, apply for tax credits, and ensure that you comply with the laws.
Several tax advisory firms in different states are offering their expertise and services. For instance, the Edison Tax Group is providing the best tax services in NJ. So, don’t be penny-wise and pound-foolish and hire professional tax practitioners.