9 Ways to Lower Your Tax Bill
Taxes can be a nuisance—and many people would prefer to pay as little tax as possible. While it’s not likely you can entirely avoid paying taxes, there are ways to use the tax code to your advantage, and a number of simple steps you can take that may lower your tax liability.
Choosing the Right Filing Status
If you’re married, you have a choice to file jointly or separately. In many cases, a married couple will come out ahead by filing jointly.
Maxing Out Your Retirement Account
Generally, the lower your income, the lower your taxes. However, you don’t have to actually earn less money to lower your tax bill.
Adding up Your Health Care Costs
Health care expenses are typically only deductible once they exceed 7.5% of your AGI (and only for those who itemize their deductions).
Saving for Private School and College
If you have children who may attend college in the future, or who attend or will attend private school, it can pay off to open a 529 savings plan.
Putting Estimated Tax Payments on Your Calendar
While this move won’t technically lower your taxes, it could help you avoid a higher than necessary tax bill at the end of the year. That’s because income tax in the United States works on a pay-as-you-go system.
Saving Your Donation Receipts
You may be able to claim a deduction for donating to charities that are recognized by the IRS. So it’s a good idea to always get a receipt whenever you give, whether it’s cash, clothing and household items, or your old car.
Adding to Your HSA
If you have a high deductible health plan, you may be eligible for or already have a health savings account (HSA), where you can set aside funds for medical expenses. HSA contributions are made with pre-tax dollars, so any money you put into an HSA is income the IRS will not be able to tax.
Making Student Loan Payments
You may be able to lower your tax bill by deducting up to $2,500 of student loan interest paid per year, even if you don’t itemize your deductions. There are certain income requirements that must be met, however.
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