In 2021, Americans filed 240.2 million tax returns. It’s a great feeling to get your hard-earned money back from the government. But, you can’t protect all your money from income taxes on your own.
If you want to lower your taxes, keep reading! Our guide on lowering your taxes will help you keep more money in your wallet.
1. Capitalize on Your Medical Expenses
One tax-saving strategy is opening a health savings account. If you have a healthcare plan with a high deductible, an HSA can help pay for medical expenses. The money in these accounts is also tax-exempt.
An FSA, or flexible spending account, is another tax-free health spending account. What makes it different from an HSA is that you can use it for bandages, acupuncture, or everyday health expenses.
Keeping a record of all your medical expenses is important. You can deduct some of these expenses from your taxes. Always ask for an itemized receipt after medical visits.
2. Use Your 401K
You might already have a 401k for your retirement, but did you know it can reduce your taxable income? The money you put into your 401k doesn’t count towards your taxable income. So, the more income you put into your 401k, the lower. your tax rate.
When you put money into your 401k, understand that you cannot take the money back out right away. You have to wait until age 60 to begin withdrawing.
3. Charitable Donations
Another way to protect your income from taxes is by donating to charity. You can deduct the value of what you donated from your taxable income.
Your donations don’t have to be monetary either. You can donate clothes, food, or items to charities. As long as you get a receipt, it is a write-off.
4. Take Advantage of Tax Credits
Tax advice isn’t complete without taking advantage of tax credits! These credits reduce the amount you have to pay, especially if you have children.
For example, the Earned Income Tax Credit lets you claim up to $6,728 in tax credits when you have three or more children. The amount changes if you have less than three or no children.
Another popular credit is the American Opportunity Tax Credit. College students can receive up to $2,500 per year for the first four years.
5. Work with Financial Experts
Are you overpaying your taxes? The best way to find out is by working with a tax expert. These experts can help you develop a tax-saving strategy and know-how to lower your taxes.
Wealth Ability, for example, specializes in teaching you how to pay less in taxes. They can help you navigate tax credits and find new ways to build wealth. Doing taxes can be scary, but working with a tax expert can make everything easier.
6. Get a Side Business
Self-employment is a great way to earn extra money — and reduce your taxable income. Self-employment opens up a wide selection of tax deductions that aren’t available to everyone else.
For example, travel, website payments, program memberships, and more qualify as write-offs. Home office deductions are one of the most common self-employment deductions.
Lower Your Taxes Today!
If you want to lower your taxes, you need to look for deductions, invest in your retirement, and work with experts. Following our tips and tricks can reduce the financial burden of paying taxes for every tax bracket. Contact your local tax expert and start saving money today!
Are you looking for more ways to increase your wealth? Check out the rest of our blog for more tips!