This year, tax brackets will remain pretty much the same. However, the rates will be adjusted using the chain Consumer Price Index instead of the CPI. These changes translate into lower inflation adjustments that may classify you on a higher bracket.
Getting stunned by your tax bill isn't an option. It's vital to prioritize making adjustments and planning ways to save on taxes. Don't know how?
We've got you covered. Here are the top 5 tax saving tips you should give a try to pay less tax.
1. Deduct Qualified Medical Expenses
Even if you own health insurance, you may need to cover certain costly medical, dental or hospital care.
It's important to keep a record of these expenses because you may be eligible to deduct them on your taxes. Keep in mind this rule applies to unreimbursed medical expenses that are more than 10% of your adjusted gross income.
2. Increase Your Retirement Contribution
Increasing your yearly contribution to your 401(k) or IRA is one of the easiest ways to save on taxes.
The IRS announced an increase to the retirement contributions limit for up to $6,000 for IRAs and $19,000 for 401(k)s or similar retirement plans.
You should consider making the maximum retirement contributions allowed to boost your tax savings. If you're 50 years or older, you may also make additional catch-up contributions of up to $6,000 on retirement plans and $1,000 for IRAs. Keep in mind these potential tax savings don't apply to your Roth IRA contributions.
3. Deduct Your Mortgage Interest
Owning a home can be expensive between your mortgage payments and maintenance. However, you may deduct your mortgage interest and property taxes.
You may also be eligible to deduct the interest you paid on lines of credit or home equity loans. To obtain these deductions, you have to itemize your interests on your taxes.
4. Start Saving for College
Taking advantage of 529 accounts can allow you to obtain great tax savings while preparing yourself for when your child leaves for college. You can't deduct these contributions on your federal taxes.
However, you may be eligible to deduct your 529 contributions depending on the state you live.
5. Claim Tax Harvest Losses
If you make investments such as stocks, you may be able to claim tax harvest losses. This strategy refers to investors selling a stock at a loss to counterbalance a capital gain.
When you take advantage of tax harvesting, you may reduce your taxable income by as much as $3,000. If it's the first time you hear about tax harvesting, you should review your tax folders for prior years to identify any eligible tax losses. However, you should consult a tax professional before giving it a try to make sure you meet the eligibility requirements.
Is Trying Our Tax Saving Tips Worth It?
Believe it or not, focusing on implementing our tax saving tips can make a world of difference. It can help you get the refund you need to buy a new car or home. Getting the best tax savings comes down to strategizing and planning before tax season comes around.
It's important to consider several strategies from making larger contributions to your retirement plans to keeping a record of your medical expenses. Create a tax savings plan tailored to your finances.
If you're unsure about how to save on your taxes, you should consider consulting a tax professional. An accounting expert can provide insight into how you can save more on your taxes.
