It’s that time of year again! We’re quickly approaching tax day, and that can be a stressful day for many people. You know you have to pay your taxes, but how do you avoid paying too much? We’ve got some tips for lowering the amount you pay in taxes each year. Of course, the tax code does shift from year to year, so make sure to thoroughly investigate the current laws before you commit to a strategy.
- Adjust your W-4. Of course, this is something you’ll need to do in advance of tax time. If you find yourself paying a huge tax bill each April, though, you might want to look into raising your withholding to reduce that number. On the other hand, if you always get huge refunds, have less withheld and you’ll have more to live on throughout the year.
- Set some money aside for retirement. When you put money into a 401(k) you can reduce your taxable income because the money that goes from your paycheck to your 401(k) is not taxes. If you contribute to an IRA, you can often deduct your contributions. What’s more, the money you invest can be withdrawn tax-free during retirement.
- Save for your child’s education. One way to do this is to contribute to a 529 plan, which is a savings account operated by a state or educational institution, but there are other funds, too. The contributions aren’t deductible on your federal return, but you may be able to deduct them on your state return. Additionally, the money in the account will grow, tax-deferred, until you need to use it.
- Contribute to a health savings account. This is another strategy to reduce taxable income and as long as you spend it on medical expenses, that money will never be taxes. You can even roll over the remaining balance at the end of each year, just as you can with retirement assets. If your employer offers flexible spending accounts, you can fund your account with payroll deductions.
- Look into self-employed deductions. If you are self-employed full time, you are eligible for a variety of tax deductions. Even if you simply have a side hustle, you can still claim self-employed business deductions. Since the regulations change frequently, it’s wise to speak to a tax professional before you file.
- Claim your home office space. If you have a home office that is used regularly and exclusively for your work, you can deduct a portion of your home expenses. The amount you can deduct depends on the percentage of your home made up by office space.
- Give to charity. Whether it’s a payroll deduction, check, cash, or donations of things like clothing and home goods, you can deduct charitable donations. This usually requires itemization, but there are many tax software programs that help you calculate the value of the goods you’ve donated, and it may be worth the effort of itemizing to get a larger deduction.
- Make sure you’re getting all your tax breaks. Do you qualify for the child tax credit? Are you taking classes that can qualify you for a tax credit? Claim whatever you can, to reduce your tax burden. For instance, if you’re in the military or reserves, you can deduct unreimbursed travel or moving expenses. If you pay private mortgage insurance, you can deduct that cost. Don’t just think about federal taxes, either. Some deductions that are no longer allowed under federal tax reform law may still apply to your state taxes.
If you need a little extra money to pay your taxes this year, VIP Title Loans will be here to help. We understand that getting the best title loan interest rate is important to you, and we value your dollar. That’s why we offer competitive, manageable rates, keeping our fees lower than most other companies. We want to earn your business by saving you money, and with locations in Arlington, Dallas, Garland, Hickory Creek/Denton, and Richardson, we’re easy to find. Call us at 214-819-9491 or 682-325-4202, or contact us for more information.