If you bring in an income, you are going to have to pay taxes. However, how much you will pay depends upon various actions that you take. That is why it is important to understand ways you can save money on your taxes.
Increase Your Retirement Contributions
One of the best ways to reduce the taxes you owe, save money, and invest in your future is by increasing your retirement contributions. You can contribute different amounts to various types of retirement account, such as a 401(k), a 403(b), a 457 plan, a SIMPLE retirement account, and an IRA account.
Certain retirement accounts, such as an IRA account or a SEP IRA for self-employed individuals, allow you to open the account up to the tax filing deadline for the past year. For example, you could open an IRA and contribute money until the tax filing deadline.
Contribute to a Health Savings Account
Next, you can save money by contributing to a health savings account (HAS) if you have a high-deductible health plan. With a health savings account, you can put money aside for future medical expenses. You don't have to use all that money within the year; you can allow it to contribute over time, and you can even invest that money. This money goes into your account pretax and helps to reduce your taxable income. Putting this money away will also allow you to handle medical expenses without drawing from other savings accounts.
Verify Your Withholdings
Every year, you should sit down and verify your withholdings. Although it is great to get a refund when you file your taxes, what a refund means is you gave the government more money than you needed to over the year, and now you are getting that money back. If you check your withholdings and adjust them to be more accurate, you may get a smaller refund to come tax time, but you will also get more money in your paycheck throughout the year that you can use daily.
If you want to save money on your taxes while helping yourself out, you should increase your retirement contributions, contribute to a health savings account if your insurance plan allows you to, and make your withholdings as accurate as possible. This will allow you to save money on your taxes while investing in yourself. Taxes are set up this way to encourage individuals to invest in their future by offering tax benefits to do so.
For more tips and assistance, contact local tax services.