Finances stress many Americans, and paying taxes doesn’t help. A Capital One CreditWise survey revealed that 73% of Americans stress more about finances than anything else.
Reducing taxes gives you more money to spare. These extra funds alleviate stress and provide you with more choices.
You can pay less money on your tax bill by taking advantage of deductions and credits. We’ll share some strategies to reduce taxes this year.
Line Up Your Expenses
Showing expenses helps you reduce taxes and monitor your financial health. You should track expenses on a spreadsheet or notebook throughout the year. Categorize each expense so you can see where your money goes.
Lining up expenses helps you find every possible deduction. You can also refer back to this data after talking with a tax professional at https://wealthability.com/.
Tax professionals can tell you about other deductibles. You can quickly refer back to your spreadsheet and review additional expenses.
Cut Off Losing Investments
Not every investment pans out for a business owner. While no one wants a loss, these unfortunate investments can provide a tax shield. Losses reduce your capital gains, resulting in a lower tax bill.
Many investors sell off assets towards the end of the year. They write off the losses to save during tax season. You can immediately put those proceeds into a different investment that produces similar returns.
Stock investors can repurchase the same shares more than 30 days later to preserve the net loss for taxing purposes.
You can also sell profitable investments if you have a high net loss. Selling profitable investments gets you closer to breakeven.
Repurchasing the same shares resets your cost basis. This reset can help you during the next tax season if you decide to sell those shares.
Capitalize on Every Tax Credit
Filing taxes without capitalizing on tax credits will leave money on the table. The government offers tax credits through various programs. These credits are practically free money that reduces your tax bill.
Tax professionals can inform you of tax options that apply to you. These credits subtract from your final bill, offering greater savings than deductions.
Charitable Donations Help with Reducing Taxes
Cleaning up your home and donating unnecessary clutter can lower your tax bill. Charitable donations count as tax deductions, and you’ll help people in need.
Individuals filing taxes can claim up to $300 in standardized tax deductions. Married filers can deduct up to $600 even if they don’t itemize their donations.
You can clean up your home towards the end of the year in time for the holidays. This tax deduction is especially useful for minimalists who want less clutter in their lives.
Max Out Your Pretax Retirement Contributions
Retirement contributions build your portfolio and set you up for a smooth retirement. Pretax contributions also reduce your taxable income.
Contribute as much as you can before maxing out. You can’t play around with assets in this portfolio. Some people invest in index funds and ETFs to diversify their retirement portfolios with little work.
Save Money During Tax Season
Reducing taxes will save money and minimize financial stress. Paying attention to credits and deductions will trim your bill. A tax professional can provide additional assistance.
Want to learn more about saving money? Continue reading this blog for additional insights.