People plan tax returns and filing to avoid paying more than they should. It also makes sense because you can do many things with extra savings. However, any financial decision requires proper evaluation and preparation. Some argue only business owners need to worry about these while it’s valid for every earning person. Keeping your tax records up-to-date can be a blessing if you wish to live well and meet most of your wishes. If you get lucky with your efforts, you may even get refunds. Of course, this requires some diligence. Many have started using professional financial services to eliminate this mental burden and reap the benefits.
Do you need help with tax planning? Agencies like Hogan CPA Financial Services can help. Before this, let’s browse a few strategies to save your money on taxes this year.
Retirement contributions
You pay pre-tax money to a 403(b), 401(k), or Traditional IRA account. You can save more by contributing to any of these accounts. Business owners or self-employed people can opt for SEP or Simple IRA for tax savings. Anyone in their 50s or more can leverage catch-up contributions depending on their plan.
Educational savings account
Are you aware of a 529 plan? This state-sponsored college savings scheme has two huge benefits. You can defer tax payments and avoid tax on qualified expenses. Some eligible education expenses include books, fees, tuition, supplies, study equipment, etc. However, you invest money in this account from your after-tax income. Also, you can expect tax credits or deductions from your state. Nearly 30 or more states have this provision. And the good thing is you can change the beneficiary, who can be your other kid or even you.
Paycheck withholdings
It refers to the amount that an employer may keep from your gross income for direct tax payment. In 2022, people got an average refund of slightly more than USD$ 3k. If you manage your paycheck withholdings well, you can also benefit. Remember, you may have to pay more if you pay only a small amount from your gross income. Sometimes, there can be a penalty. Since you can tweak withholdings from time to time, it’s a good idea to remain updated about the status. Your HR department can help here.
Tax credits and deductions
Learn about your eligibility for tax benefits. For instance, you can save more by making your home energy-efficient. If you succeed, IRS can reward you with energy tax credits. If your child is less than 18 and depends on you, you can look for the child tax credit. Likewise, you can get some rewards for using EVs.
You have plenty of choices to save your income tax money. However, it demands proper calculation and knowledge. For any ordinary person, filing taxes can be too much. After all, it involves many variables and the pressure of the deadline. You can eliminate all this by hiring a professional service. Talk to a financial advisor who manages tax and other areas. Let them guide you and take away all your stress.