If you want to save some money this year, here are a few tips on how to reduce your tax bill. Many people simply look at their income and expenses and claim whatever they can — which is fine — but if you’re more concerned with reducing your tax bill than just claiming what you think you should have the option to claim, we’ve got some tips for you.
Boost Your Retirement Contributions
If you can, it’s a good idea to increase your contribution toward your retirement account — like, for instance, your individual retirement account — to reap a higher tax benefit. If you work as a freelancer or happen to be self-employed, you can make contributions toward a SEP IRA account to claim tax benefits.
Fund an HSA (Health Savings Account)
Funding an HSA is another way to reduce your taxable income. Contributions made to an HSA can reduce the income eligible for taxation, and any unused money rolls over from one year to the next. You can use the money deposited in your account to pay for health-related expenses, making this a win-win!
Collect Any Tax Credits
Tax credits are extremely valuable since they can reduce your tax bill substantially. For instance, if you qualify for a $1,500 child tax credit, that will save you a total of $1,500 in taxes.
Tweak Your W-4
Got a huge tax bill this year? You can change your W-4 form to have more tax withheld from your paycheck every month, so you won’t owe as much when it’s time to file next year. Or if you got a big refund, do the opposite and reduce your withholding — otherwise, you could be needlessly living on less of your paycheck all year.
Donate Money or Goods
Charitable contributions are tax-deductible, and they don’t even have to be in cash. If you’ve donated clothes, food, old sporting gear, or household items, for example, those things can lower your tax bill if they went to a bona fide charity and you got a receipt.
We hope these tips help reduce your tax bill this year!
