Most people do not like preparing their tax returns and paying taxes. One of the best things that you can do to reduce stress and save money is to find and use tax credits and deductions that you are legally entitled to take. It is an essential part of year-end tax planning.
Here are seven ways to reduce your tax burden:
Defer income and capital gains. Pushing these items to receive them in the next calendar year will rescue your gross income this year.
Donate to charity. Worthy causes always, need help. The gifts you make to them are deductible if you itemize. Even if you do not itemize, the IRS gives you a tax break.
Utilize tax-loss harvesting. Review your stock portfolio for capital gains and losses. Making paper losses real can offset your gains and reduce your overall tax burden.
Contribute to qualified retirement plans. Make sure that you maximize the tax-deductible contributions to qualified retirement plans such as your IRA and 401-k before year-end. If you work for yourself, do not forget about a self-employed IRA or solo 401-k.
Review your health and medical expenses. Health care is increasingly more expensive, especially during the last few COVID years. These costs may be deductible.
Do not forget to include the cost of devices, equipment, and supplies prescribed by a doctor.
Make an additional mortgage payment. By making an extra mortgage payment, you may substantially increase your deductible interest expended as well as pay down your principal.
The seven tips mentioned above are the tip of the iceberg when it comes to paying the lowest amount of tax you are legally obligated to give to the government. Because the tax code is so large and complex, there are many more ways to lower your tax burden. Some of these deductions and tax credits are pretty obscure but may apply directly to your particular situation.
Turn to professional help to uncover even more tax savings. If you are a resident in and around Rancho Cucamonga, California, consult the team at Whyte & Associates, Inc for tax planning services. Call (909) 575-0080 to schedule an appointment today!
