With tax season soon approaching, everyone is looking for viable and of course legal ways in which they can reduce the amount of taxes that they have to pay. It’s that beautiful time of the year where you have to get all your past bills and statements out, to make a proper audit, and to figure out just how much you have to pay. Doing taxes is easy, and getting tax exemptions is even easier. A lot of people don’t realize the sheer number of things that they can go to reduce the amount that they spend on taxes. It is easy to distinguish these factors that contribute to lower taxes, and we are here to help you out, and give you the rundown of the things that can help you reduce the amount that you pay.
Here are 9 ways to reduce your taxable amount and increase your savings:
Start A Business
Starting up your own business is one of the best ways to reduce the amount that you pay on taxes. When you start your own business, you control the amount that you show as income, which in turn affects how much you have to pay in taxes. A business can also help you send off certain expenses as deductible income, thereby reducing your payments.
Opt For Earned Income Tax Credits
Earned Income Tax Credit is specially for those pertaining to lower and middle income groups. If your income per year is below $50,000 you can opt to go in for an income tax credit, which can offer an exemption for a maximum of $6,000. A lot of people don’t realize if they are qualified or not for this tax exemption, which is why it is essential to check before you pay.
Bring In The Kids
Children are of a huge benefit when it comes to tax credits, since child care costs are subtracted out of the total amount that you have to pay for taxes. The more number of children that you have who aren’t earning for themselves and who are under the age of seventeen, the less the amount of taxes you have to pay.
Save For College
College is by no means cheap, and people start saving for it right from the time their kids are born. However, what many people don't realize is that if they put their money into a college fund or pay for some form of tuition, they don’t have to pay that amount as taxes.
Extend Your Mortgage
Even though extending your mortgage might result in you paying more interest, the payments itself are tax free. The key is to compare the amount that you pay in additional interest, and the amount that you would pay in taxes, and you can get a good estimate of which one is the better option.
Put Money Into Your Retirement Fund
Just like a college fund, money that is put into a retirement fund is tax exempted. If you are looking for a great way to save money without paying the high amount of taxes that you would otherwise have on them. This will also help you immensely in the long run, as you will have more money to enjoy your retirement to the fullest.
Help The Needy
Money that is donated to charities and non-governmental organizations is deducted from the taxable amount. A total of $13,000 can be received by an individual without having to pay any taxes on it. Splitting your donations in the name of your child is a good way to reduce your taxable amount by an even greater percentage.
Turn To Green Energy
In an effort to promote the use of greener energy and to benefit the environment, the government has made green energy installations entirely tax free to encourage more and more people to go down this route.
Check Your Securities
Accountant Paul Miller has stated that “Identifying completely worthless securities and deducting those from your taxable income is a great way to reduce the amount that you pay”. This is a less taken route that ends up being a lot more effective than most other manners of tax deduction.