CUT YOUR INCOME TAX IN THREE STEPS
Every taxpayer seeks to slash their income tax. Anyway, who wants a high tax bill? No one. Here are three methods to reduce your income tax the right way.
Jot down all your taxes to determine the items you can deduct on Form 1040. Many taxpayers fail to realize state sales tax is deductible. Mileage driven for charitable activities or a doctor’s appointment is deductible as well. If unreimbursed business expenses exceed 2% of your adjusted gross income, you can have it subtracted. Investors can deduct investment fees, which is helpful to people who place hefty investments throughout the year. You can also take the above-the-line deductions or make adjustments to your gross incomes. If you have a Health Savings Account, you can claim an above-the-line deduction for HSA contributions.
Pay fees correctly. Fortunately there are ways to slash the amount you pay in income tax. Do it in three steps: plan ahead, move around, and mind the timing. For instance, if you hold both an individual retirement account and a non-IRA account, which charges investment fees, you may opt to pay all the fees from the latter because such charges are tax deductible.
Plan retirement now if you want to find out the amount of money you will owe in taxes once you retire. For a Roth 401(k) or Roth IRA account, you can avert taxes on that amount should you take the money out at retirement. You need not to pay taxes on Roth 401(k)s and Roth IRAs when you withdraw. Also, you can roll over a Roth 401(k) to a Roth IRA once you retire. So if your employer offers that option, open a Roth 401(k) instead of a traditional 401(k). However, you still need to pay taxes in case you roll over your traditional retirement account to a Roth.
Another method is to lower your expenses you will have in retirement. As much as possible, withdraw when necessary. You will incur fewer taxes if you do often withdraw. Take into account your current lifestyle and consider making any changes. One classic way of cutting your retirement cost is to pay off any mortgage before you hit your golden years.
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Cut Your Income Tax in Three Steps
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