While paying taxes that you legally owe the tax authorities is critical, there's no need to pay more than you owe. While evading taxes is a crime, it's not against the law to use legit strategies to minimize your federal or state taxes.
This post will cover seven legal ways to reduce your taxes. Depending on your eligibility for tax benefits, using them could save hundreds or thousands of your hard-earned dollars. Using one or two tips could help you eliminate your entire tax bill or increase your tax refund.
Here are the details on each of these legit ways to lower or eliminate your tax liability.
1. Contributing to retirement accounts
Making contributions to one or more retirement accounts is one of the best ways to skip taxes and boost your future financial security. I'm a huge fan of participating in workplace retirement plans, such as a 401(k) or 403(b). They come with high contribution limits, and many employers pay some amount of matching funds to sweeten the deal.
Just about everyone with earned income (or a spouse with income) can put money into an individual retirement account or IRA. That includes employees who don't have a retirement account at work and the self-employed. There are even more options when you work for yourself part- or full-time, including a SEP-IRA and a solo 401(k).
So, how exactly does using a retirement account cut your taxes? With traditional accounts, such as a traditional IRA or 401(k), your contributions are tax-deductible. That means you don't pay taxes on them in the current year.
For instance, if you earn $80,000 and max out a 401(k) with contributions of $20,500, you only pay taxes on $59,500 of income—not $80,000. For 2022, if you're over age 50, you can contribute $6,500 more, for a total of $27,000. What's not to love about that?
... Keep reading on Quick and Dirty Tips
Tidak ada komentar:
Posting Komentar