Posted December 18, 2023
There are a variety of ways to ensure that you don't pay more than your own fair share of taxes. You can save year round as well as at the very last minute, but a little bit of planning really goes a long way when it comes to income taxes.
Use these strategies now and throughout the year to maximize your returns:
1.Reference your old returns. Revisiting your old tax return paperwork can help you see how you've saved and owed in the past. Use your old returns as a guide and strive to make improvements over last year so you can pocket more money this time around.
·What deductions have you taken in the past? Did you take the standard deduction or itemize? Can you take any of the same deductions this year or implement new ones to improve on your results of the past?
·What tax credits or tax shelters did you take advantage of last year and years prior? Can you do the same thing this year as well?
2.Choose investments wisely. Make the most out of your investment income by putting your money in tax-free or reduced-tax investment vehicles. Check to see if you qualify for any tax breaks on your investments. These can translate to tax savings where you didn't expect them.
3.Take advantage of tax shelters. Saving toward financial goals like retirement can help you cut your taxes. 401(k) plans and traditional IRA accounts allow you to defer the taxes paid on this part of your income for as long as several decades until you retire.
4.Be wise with your deductions. Determine if the standard deduction is better than itemizing your deductions or not. If you keep a record of your tax-deductible expenses, you may find that your itemized deductions add up to more than the standard deduction. Consider your options closely to get the best possible results.
5.Take advantage of available tax credits. There are a myriad of tax credits for different purposes, such as raising a child, paying education expenses, buying a home, and many more. Research available tax credits ahead of time and determine which ones you can take advantage of. You can save a lot of money at tax time with these credits.
6.Plan ahead for next year. The more you plan ahead the better off you'll be when tax day comes. Get a jump on your taxes by giving yourself ample time to plan and prepare. You'll savor less stress and more tax savings as a result.
·Monitor your income, check your withholding, and ensure that you're doing everything in your power to lessen your tax burden throughout the year. Every step that you take ahead of time is going to be one less worry when tax time finally rolls around.
The key to maximizing your return is in advance planning and preparation. Keeping these tax strategies in mind throughout the year will help you prepare for a good tax day every year.