When you think about your taxes, the first thing that probably springs to mind is how much money you pay each year on your tax bill. However, there are ways in which you can save money on your tax bill, apply for credits and deductions and ensure a more financially secure future.
In this article, we’ll explore some basic tips and some tax-saving and money-making techniques that many people are not aware of.
Timing is Everything: When it comes to securing the biggest tax refund, the smart taxpayers know to watch the calendar. For example, they may aim to pay January’s mortgage payment before December 31st to secure more interest on their mortgage interest deduction. If you are self-employed, you can do something similar by paying your fourth-quarter state estimated taxes one month early in December.
Moonlighting: Did you know that jobs outside of your main source of employment could net you a couple of thousand dollars tax-free every year? Moonlighting as a freelancer, for example, gives you the same rights as a full-time freelancer and you’ll be able to claim the same expenses. Just make sure you don’t void any employment contract you already have by doing other work on the side.
Consider an Accountable Plan: If you run a small to medium-sized business with employees, you could save on paying employment taxes by considering an accountable plan. By reimbursing your employees for travel, tools, books, entertainment and other costs relating to their work, you can deduct the expenses without reporting these reimbursements as employee income.
Rent Out Your House: Travel regularly and leave your home attended for 14 days or less? You could rent it out and enjoy the rent payments completely tax-free. This works on your main place of residence and on vacation homes too.
Seek Out Cash-Back Deals: There are many cash-back deals on the market, including credit card cash-back and store charge cash-back. Many of these companies give a minimum of 2 percent, which could net you a tidy sum over a few purchases. You can only claim for tax-free cash-back if the purchase was for personal use.
Set Up An HSA: By setting up a health savings account alongside a high-deductible health insurance policy for your family, you could put $6,150 of tax-deductible money a year aside. If you are over the age of 55 you can put away $7,150 into your account. This is a great way to prepare for the future, but you can also use the money you saved straight away to pay for medical costs not covered elsewhere. If you use the HSA later down the line to pay for your medical costs, they can be used completely tax-free.
Consider Working With a Tax Professional: There are many credit, deductions and tactics you can use to make the tax system work for you rather than against you. For more complex situations where you are not sure what your position is or you need a little advice on how to use the tax system to your best advantage, a tax professional will help to steer you in the right direction. You’ll get to learn some of the lesser-known tax secrets and avoid nasty surprises like a bill for back taxes you had no idea you owed.
Making Tax Less Taxing: There are many ways you can save on your taxes and ensure that you are claiming for everything you are entitled to. One of the first things you can do is avoid unnecessary charges and increase financial stability by filing and paying your tax bill on time. From here, you will be in the best position to review the tax credits and deductions that you are eligible for and which could help you to improve your financial footing.
To find out more ways to improve your wealth through your taxes, speak to our friendly team today.