Taxes can be expensive, but there are several was you can minimize what you owe to Uncle Sam. For this blog post, we wanted to talk about some of them.
Modify your W-4
Several years ago, we had a client who had a full-time job and freelance income. When she filed her tax return for the prior year, she wound up owing the IRS close to $2,000. Her solution was simple- she “updated” her W-4 to have extra taxes taken out of her paycheck.
If you have questions about how to change your W-4 and/or you’d like to learn more about the benefits of doing so, call our office today to schedule a consult.
Maximize your charitable giving
Charitable contributions are tax deductible- and there are lots of ways to give. For example, are you planning on moving before the end of the year? If so, as you start to pack your belongings, take some extra time to figure out what’s going with you, what’s trash, and what can be donated. Kids’ toys, clothes, furniture, bikes, tools, appliances and other household items can be donated (and deducted from your taxes.) The caveat in this, is the items need to be taken to a bonafide charity and you need to get a receipt.
Track your medical expenses
Any medical expenses that exceed 7.5% of your adjusted gross income (AGI) can be deducted from your taxes. This includes things such as hospital stays, medications, doctor’s visits, co-pays, dental procedures, vision procedures and ER visits. If you’re 2020 AGI is $50,000, any medical bills beyond $3,750 may be deductible.
Add money to your 401(k)
When you add money to a 401(k) account, you reduce your taxable income. It’s also worth noting that money that’s diverted to a 401(k) from your paycheck is not taxed. The IRS states that for the 2020 tax year, you can allocate up to $19,500 into this type of account. You can, of course, always funnel more, but you can expect to be taxed on it. (For more information on how this works, call our office today to schedule an appointment.)
Tax season may be months away, but that’s not to say you shouldn’t start planning ahead. Why? Because a little planning now could potentially save you hundreds, if not thousands of dollars, when it’s time to file.