Top 5 Hidden Methods for Reducing Your Taxes
Mon, 11/19/2012 - 8:09pm | by Guest Contributor
Tax season is a time of headaches, scrambling, and financial stress for many, but it doesn't have to be that way. Those who stay organized and know how to get the most out of their taxes can actually turn tax season in their favor. Remember these 5 hidden methods for reducing your taxes next season.
Contribute to a Retirement Account
Every tax season, the government rewards those who plan for the future. Making contributions to a retirement account such as a 401k or IRA benefits you on your annual taxes, because the money deposited into these accounts goes into a tax deferred status. It will not be taxable until it is withdrawn, so your annual income tax decreases as your savings increase.
Deduct Student Loan Payments
If you are making payments on student loans after graduation, you may be eligible for a significant tax deduction. Payments on student loan interest are tax deductible, so responsible borrowers have the advantage of receiving tax breaks for their prudence every year. Be sure to keep track of any student loan payments you make over the course of the year. Hold onto your receipts, account statements, and other documentation so that you can furnish proof of your repayments and properly calculate your deduction when the time comes.
Lower Your Withholding
Many people operate under the assumption that a hefty tax return every year is some kind of reward. On the contrary, when you file your taxes you are really just settling a financial affair with the government. If you receive a large refund, it means that you've been overpaying throughout the year, and the IRS is paying back the difference. By lowering your withholding on each paycheck, you avoid this charade by keeping more money in your own accounts for personal use throughout the year. Ending the cycle of overpaying through a lower withholding yields smaller refunds, but lets you hang onto more of your money.
Write Off Travel Expenses
Does your work constantly take you on the road, out of town, overseas, or in the air? Travel expenses can be tax deductible if you're traveling for business purposes, so be sure to keep track of all these expenses. Air fare can be written off on your annual tax returns, as well as hotel accommodations, car rentals, meals and other expenses. To help calculate these and other tax deductions and credits, use websites like http://www.taxcreditscalculator.co.uk/ or speak to a professional accountant to maximize your potential tax breaks.
Make Charitable Donations
It has never been easier to get a break on your taxes and help the world at the same time. Making charitable donations to a worthy causes gives you the opportunity for great deductions on your taxes every year. Hurricane relief funds, environmental protection movements, and many others are available and in need of donations. Find a worthy cause and start making donations today to reduce your taxes and lend a helping hand at once.