7 Tax Tips to Keep More of Your Money
As the tax season approaches, it's a good time to start thinking about ways to keep more of your hard-earned money in your pocket. Here are seven tax tips to help you do just that:
Make the Most of Your Retirement Contributions: Maximize your contributions to your retirement accounts, such as 401(k), 403(b), or IRA. By doing so, you not only save for your future but also reduce your taxable income in the current tax year. The maximum contribution limits for 2021 are $19,500 for a 401(k) and $6,000 for an IRA (plus an additional $1,000 if you're age 50 or older).
Claim All Your Deductions: Be sure to claim all relevant tax deductions to lower your taxable income. Some commonly overlooked deductions include state income taxes, property taxes, charitable donations, and home office expenses (if you're self-employed).
Keep Track of Your Medical Expenses: Medical expenses can add up quickly, so keep all your receipts for medical and dental bills, prescription drugs, and health insurance premiums. If your total medical expenses exceed 7.5% of your adjusted gross income (AGI), you can deduct the excess amount on your tax return.
Don't Overlook Tax Credits: Tax credits can reduce your tax bill dollar for dollar, so be sure to take advantage of any credits you're eligible for. Some commonly claimed tax credits include the Earned Income Tax Credit (EITC), Child Tax Credit, and Lifetime Learning Credit.
Hire a Tax Professional: If you have a more complex tax situation, such as owning a business or rental property, it may be worth hiring a tax professional to help you navigate the tax code and ensure you're taking advantage of all the deductions and credits available to you.
File Your Tax Return on Time: Filing your tax return on time is important, even if you can't pay the full amount owed by the deadline. The IRS charges penalties for both late filing and late payment, so it's best to get your return in on time to avoid these.
Stay Organized: Keep all your tax-related documents, such as W-2s, 1099s, and receipts, in one place throughout the year to make tax filing easier and less stressful. Consider using a tax software program or mobile app to keep track of your expenses and deductions.
By following these tax tips, you can keep more of your money and avoid common tax pitfalls. Remember, every dollar saved on taxes is a dollar that can be put towards your financial goals, so take the time to plan and prepare for tax season. Don't forget to file and submit your taxes by April 15, 2024!
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