Death and taxes and two things we cannot avoid. While neither is a pleasurable experience, there are ways in which the pain of paying taxes and going through the paperwork can be mitigated. Not just that, with the right tax strategies and proper planning you may be able to save a considerable amount of money. Here are seven strategies, which might help lower your taxes and help alleviate some of the stress that comes with tax season.
1. Learn how to earn tax-free income.
When you can find ways to earn more tax-free income, you are able to lower the amount you owe in taxes. There are several ways to do this including setting aside money in a tuition plan, opening a health savings account, and taking advantage of employer benefits such as 401K, life insurance and educational assistance.
2. See if you can maximize your deductions.
It is a well-established fact that when you have deductions, you reduce your taxable income. While there are a few deductions that have disappeared under the new tax laws, you still have a number of deductions you can take advantage of. An experienced Virginia tax attorney can help understand for what deductions you may be eligible.
3. Make contributions to a flexible spending account.
This is another simple way to lower your taxes. Just pay into a tax-free health flexible spending account. The money that goes into this account is not subject to any income taxes. You may elect to contribute a certain amount from each paycheck into this account. The payment will be deducted from your paycheck.
4. Learn how to maximize tax credits.
The government uses tax credits to provide tax relief or to encourage taxpayers to get involved in some activities. There may be credits for dependent care, first-time homebuyers, for parents who adopt, and for childcare. The IRS updates its list of tax credits each year. So, it is important to find out what tax credits you are eligible for.
5. Make charitable contributions.
Donating to charities of your choice can actually help lower your taxes. You could make itemized deductions on your tax return for donations made to charities that are registered as nonprofits. You could donate cash, stock or items such as cars.
6. Pay your medical bills.
Deducting your medical expenses could help bring your taxes down. For the 2017 and 2018 tax year, you could deduct out-of-pocket medical expenses that exceed 7.5 percent of your adjusted gross income, which is down from the current 10 percent. The lower threshold will get raised back up to 10 percent for the 2019 tax year.
7. Shifting your income might help.
When you move your income to a child who is in a lower tax bracket can also help bring down what you owe in taxes. This is a strategy known as “income splitting” and it helps reduce tax liability by bringing down the taxpayer’s adjusted gross income.
There are a number of ways in which you could reduce your tax exposure, but this could change with evolving tax laws. It would be in your best interest to contact an experienced Virginia tax attorney who can help answer your questions and assist you with lowering your tax burden.