(DailyAnswer.org) – We all know that the only two constants in life are death and taxes, but that doesn’t mean that we have to look forward to either event. In fact, paying taxes might be among the least pleasurable things that the average person has to do in a given year. The only thing you can do to combat the feelings of distress when it comes time to pay your tax bill is to work on keeping that bill as low as possible. Simply knowing some of the ways that you can reduce your tax bill each year is a great relief to many people.
Understand Deductions
The tax code is incredibly complex, and it is intimidating for some people to learn how they can take deductions against their taxes.
When a taxpayer takes the deductions that they are rightfully owed, then they can save themselves a lot of money on their tax bill each year. There are different types of deductions that one might qualify for based on the line of work that they are in. You should try to learn as much as possible about the deductions that best apply to your specific line of work.
Contribute More to Your Retirement
There are special benefits that come with contributing additional funds to your retirement accounts. Some of the retirement accounts provided via your employer might make it possible for you to store some of your money in a tax-deferred account that can help reduce your tax expenses. There are different types of retirement accounts that you might be offered, including:
- 401(k) Plans – A popular choice as these are often company sponsored and frequently feature some kind of company match to the funds that are contributed to the plan. The maximum contribution to this kind of account is $20,500 and $27,000 for taxpayers over the age of 50 as of 2022.
- Traditional IRAs – This is a retirement account that is known as a pre-tax account. This is because contributions go into this type of account BEFORE they are taxed. As such, the tax benefits are not as great as some other types of accounts, but the amount of funds contributed may be greater.
- Roth IRAs – This is a post-tax retirement account that has some of the greatest tax benefits. The funds contributed to this account have already been taxed. Therefore, the gains on these funds are tax-free as long as certain stipulations are met.
These are all great options to keep your tax bill under control in a given year. Take advantage of any of these that is available to you.
Make Charitable Donations
Instead of handing over more money to Uncle Sam, why not give that money to charitable causes that you believe in instead? That is precisely what many taxpayers do as they can deduct up to $300 from their tax bill each year when they donate to charitable causes. This will make your heart feel good as you give money to an organization that you believe in. At the same time, you can take that contribution off of your tax bill at the end of the year. It might be just a small amount of money, but at least it is something that doesn’t go into the pocket of Uncle Sam.
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