Here are some tips and tricks to pay less in taxes and put it towards building wealth
How great would it be to spend less on taxes? Amazing right? If you’re a working professional, chances are you pay thousands of dollars in taxes per year.
However, did you know there are options for saving on taxes and allocating tax-free funds to your own benefit? We found some tax loopholes that will save you money, build your wealth, and put your money where you want it to go.
Here are a few options to consider:
1. Take Advantage of Tax Credits and Deductions
Tax credits and deductions can reduce the amount of income that is subject to taxation, resulting in a lower tax bill. Some common credits and deductions include the Earned Income Tax Credit (EITC), which is available to low- and moderate-income workers, and the Child and Dependent Care Credit, which is available to those who pay for childcare while they work.
Take advantage of all tax credits available to you, they can make a big difference in how much in tax you pay.
2. Contribute to a Retirement Account
Contributions to certain retirement accounts, such as a 401(k) or Traditional IRA, can be deductible from your taxable income. This means that you can lower your taxable income by the amount you contribute, which can result in a lower tax bill.
Even though this won’t increase your disposable income, it will be better for you in the long run. The best way to save for retirement is with tax-free dollars, and 401(k)s and IRAs are the most common ways people do so.
Just be sure to read up and do your research to make sure that you are putting in tax-free income into it.
Hot Tip: Finding tax loopholes can increase your long-term wealth year over year. Be sure to check yearly before filing your taxes!
3. Keep Track of Your Charitable Donations
Donations to qualified charitable organizations are tax-deductible, so it’s important to keep track of any charitable donations you make throughout the year. This includes cash donations as well as non-cash donations, such as clothing or household items.
One thing that many people forget is including religious donations. You should include your religious donations in your tax deductions if you make them regularly.
Any donations you make will give you a significant tax deduction. Just be sure to have a receipt of all donations in case you need to provide it.
4. Claim the Standard Deduction
If you don’t have a lot of itemized deductions, you may be able to claim the standard deduction instead. The standard deduction is a set amount that you can deduct from your taxable income, which can help to lower your tax bill.
5. Get Free Tax Filing Help
If you earn under $72,000 annually, you can qualify for free help from the IRS. This is to make sure that Americans have the resources to file their taxes correctly.
Also, many libraries across the country offer free help from qualified tax professionals during tax season. Contact your local libraries to see if they offer it.This is a great resource if taxes confuse you.
Check out our article on how to file taxes for free here!
6. Consider Tax Software
Using tax software can make the process of filing your taxes easier and more accurate. Some options even offer features like importable tax forms and the ability to e-file your return for free.
If you don’t mind paying for it, this is a great way to simplify the tax filing process and can save you hours on crunching numbers and filling out forms.
It’s important to note that everyone’s tax situation is unique. It’s always a good idea to consult with a tax professional or use reputable tax software to ensure that you’re taking advantage of all available tax savings opportunities.