No matter how much you earn, high tax bills can throw you into a loop of financial distress. Since taxes are an unavoidable responsibility, this can create a series of problems that have the power to shake up your personal and professional life alike.
That’s why, it’s important for you to learn how to lower your tax bill throughout the year. This not only saves you from spending big during tax season, but also keeps you from running into unnecessary challenges.
The following guide shines a light on the best tax strategies to lower your tax bill.
Check If You Qualify For Earned Income Tax Credit
The Earned Income Tax Credit (EITC) can dramatically lower your total tax bill. Since a tax credit is a dollar-by-dollar reduction in the amount of taxes you owe, it is one of the best examples of how tax laws impact refunds. In 2024, the maximum income to qualify for the EITC ranges from $18,591 to $59,899, depending on how many children you have.
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Put Money Towards Your Retirement
Another way to lower your tax bill is putting money towards specialty retirement accounts like an Individual Retirement Account (IRA) and a 401(k). Both accounts have a certain threshold of tax exempt contributions, but they can make a world of difference for reducing your owed taxes. If you get your taxes done by professionals who use software like Intuit Accountants, you can consult with them on this strategy in detail.
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Adjust Your Withholding
Whether you work for someone or manage your own business, you might be aware of how withholding a certain amount from your paycheck works through the year. At the end of the year, your withholding comes together to deduct the contribution amount from your tax bill. If you are having trouble with consistently large tax bills due to your overall financial profile, you can adjust your W-4 to increase your withholding across the year.
Look For Additional Tax Credit Options
Besides calculating with a NOTIQ cash envelope kit to see how much amount you can contribute to your withholding, you should also look for additional tax credit that you may qualify for due to various factors. This includes options like the Child Tax Credit and the Residential Clean Energy Credit. In addition to doing your own research, you can discuss the possibility of availing these tax credits with your accountants.
Keep Track of Your Medical Bills
From UnitedHealthcare insurance plans to Delta Dental insurance policies, even a wide range of medical coverage options can still result in you paying some of your medical bills in the end. By reporting these expenses, you can reduce your total tax bill. This means that if you spend a portion of your hard-earned money on unwanted medical costs, you can find some solace in lowering your tax bill at the very least.
Use a Flexible Spending Account
Speaking of healthcare coverage, the Flexible Spending Account (FSA) can help you pay for certain medical expenses without taxing the amount you are spending. This works by having your employer transfer a portion of your pre-tax paycheck to your FSA. For this purpose, many employers use the ideal payroll software for business to cut through redundant tasks and boost their overall processing time. For added comfort, you can discuss your options with your employer before tax season.
Consider Using an HSA
A Health Savings Account (HSA) is similar to an FSA, but it is available to people with a high deductible health plan. An HSA also has a higher limit. If your household has major health expenses every year, it might do you well to consider an HSA to decrease your tax bill. You can also use a So Typical Me personalized planner to budget for these expenses and estimate your tax bill.
Report Your Charitable Donations
Giving not only helps you feel good from the inside, but also helps your financial profile from the outside by decreasing your tax bill. You can choose the best accounting services to make sure that you can properly report your charitable donations. Depending upon how much amount you give, you can noticeably decrease your final tax bill. This can ensure that you don’t get caught by a bad surprise during tax season.
With these tips, you can lower your tax obligation by the end of every year. As long as you are careful about managing your finances, these suggestions can help you every step of the way.
