8 Tips that will reduce your Tax and free you from Frustration

Tax Bill!
Ring bells? Hey, don’t panic!

Here’re a dozen simple and easy manoeuvres, which could slash what you’re owing to the IRS.

Tax is never fun for anyone, and an unexpected and unanticipated tax bill can burn a hole in your pocket ruining your day.

If you wish to avoid that spiteful surprise, we’re presenting these 12 easy and simple moves that can make you cut your tax bills.

In a lot of cases, you should itemize instead of taking standard deductions so as to make use of these strategies; however, an extra effort may be worth it!

Let’s begin:

1. Tweaking W-4:

W-4 is a form that is given to your employer by you. This form contains instructions regarding how much tax your employer must withhold from every paycheck.
• You can change the W-4 form any time you want.
• If you’ve got a huge tax bill in the current year and can’t afford to have another surprise next year, you must raise your withholding so you owe less in next April.
• If you’ve got a huge refund, you must do just the opposite and trim down your withholding – or else, you could be unnecessarily living on a lesser paycheck throughout the year.

2. Contributing to an IRA:

Individual Retirement Accounts (IRAs) are broadly classified into two categories – Traditional IRAs, and Roth IRAs.

You might deduct your contributions to the traditional IRA, although your deductibles depend on whether you or your better half is covered under a retirement policy at work.

For the current tax year, you might deduct your contributions if you’re covered under a retirement policy at work, your modified gross income was USD 123,000 or more, and you’re married.
In countries like India, ULIP investment Plans are one of the common investments to reduce their tax bills.

3. Stash money in your 401(k):

Less taxable earnings mean lesser tax and 401(k) is a popular means to cut down your tax bills. The IRS does not levy tax on the amount directly diverted from the paycheck into 401(k).
For the current year, you can direct up to USD 19,000 every year into the account.

4. Save for College

Keeping money aside for your kids’ tuition can shave some money off of your taxes, too. The most sought-after option is to contribute to the 529 plan, a savings account handled by educational or state institution. You cannot deduct the contributions made by you on your federal income tax, but you may be able to deduct on the state return if you put your money in the 529 plan of your state.

5. Fund your SFA

Your IRS allows you to direct tax-free dollars from your paycheck into your FSA per year, so if your company provides a flexible spending account, you may wish to take advantage of this to trim down your tax bills.

In the current year, the limit is USD 2,700. You will have to make use of the money during that calendar year for dental and medical expenses, but you may also be allowed to make use of it for related daily items like pregnancy test kits, bandages, acupuncture, and breast pumps for yourself and qualified dependents.

6. Subsidize your dependent care FSA

The FSA with a tweak is another simple and handy means to trim down your tax bills – if your boss provides it.

Your IRS will not include USD 5,000 of your income that you have your company directs to the Department Care FSA account. This means that you will avoid making a payment on taxes on that money. This can be a huge win for parents of children under 13 years of age because before and after their school care, pre-school, daycare, and day campus generally are allowed uses.

7. Keep a file of your medical expenses

If you have been in a hospital or had other expensive dental or medical care, keep the receipts with care.
In general, you can get a deduction on your eligible medical costs or expenses that are above 10% of your adjusted gross earning for that particular tax year.

8. Rock the HAS
If you have high-deductible health care policy, you might be able to lighten the tax load by making a contribution to the health savings account that is a tax-exempt account you can use to make payment of medical expenses.

In a Nutshell!

We know it is not fun for anyone. But trust us; a small tiny advance planning will always aid you in trimming down the taxes. Whether you’re having a good year, recovering from the recent losses, or still thrashing to the ground, you might be able to save big money on your tax bills if you make the right moves.