Nobody likes paying taxes, and everyone wants to reduce income tax. Those who work hard to save their money for the future find it particularly difficult to see part of their savings sent away. Fortunately though, there are a number of legal ways to reduce taxable revenues and incur expenses that will reduce the tax bite. However, it requires income tax planning. Some ideas are outlined in the following free tax help.
Paying taxes is hard enough. It is even worse when one has to pay extra fees. Those who have significant savings and investment income often are hit with extra fees at tax time because the government requires at least 90% of tax liability be paid during the tax year. Therefore, it is better to overpay and give the government a free loan during the tax year than to underpay.
Save for retirement
Saving for retirement is something else the tax system favors and a good way to reduce one’s current income tax. Money contributed to a 401k will be free of taxes until retirement when taxable income, and thus the tax bracket, is almost always lower. Roth IRAs are also a great investment since they can grow tax free until retirement. Make the maximum contribution to these every year.
Use medical and educational savings accounts
If the expenses are going to be incurred anyway, plan for the future with medical and educational savings accounts. These are great savings tools are will reduce taxable income.
Since certain expenses need a minimum before they can be deducted, bunch them together in one tax year whenever possible.
Everyone’s tax situation is unique so everyone needs slightly different income tax information. Having a professional prepare one’s taxes certainly helps find more income tax exemptions, but the costs may not be worth it for some. Income tax return software such a TurboTax is a cheaper way for many taxpayers to navigate the complicated tax code, find all the deductions one is entitled too and makes tax preparation much easier.
Run a small business from home
Running a small business can be very rewarding and offers many ways to reduce income tax. With the internet, this is much easier than ever, and there are so many niche businesses out there. One just needs to find something they are interested in and set up a website and company. Once this is done, many expenses will become tax deductions. For example, with a home office, heating, light, rent, internet connection, phone, travel and many other expenditures become business expenses (at least in part). With a home business, operating costs are low too. Regardless of if the intention is to build the business into a full-time occupation or not, it is still one of the best ways possible to reduce income tax.
Tax laws are frequently changing so always keep an eye out for the latest income tax information. Any legal means to reduce one’s tax burden that can be found makes paying taxes less onerous.