There are many ways to save money on taxes. Given the different deductions and credits available, it is possible to reduce your tax liability by up to $6,000. You can also take advantage of tax-deferred investments to help build up your retirement savings or use tax-free savings accounts to help you meet short-term goals. There are plenty of ways you can save money on taxes without sacrificing any benefits! Read this article to find out how tech can help you save money on taxes!
1) Track Your Gas Mileage
The first thing you should do to save money on taxes is track the number of miles you drive for business purposes. Using a simple app or template that tracks your mileage can help you get reimbursed for driving your car for work-related purposes, which will ultimately reduce how much you pay in taxes. If your employer doesn’t reimburse you for mileage driven, you can always opt to deduct the mileage on your tax return. Either way, tracking your gas mileage will help you save money in the long run!
2) Start Tracking Your Expenses
If you don’t know where your money is going, it’s easy to spend more than you should. That’s why it’s important to track every expense and keep tabs on how much you’re spending. Tracking expenses is a simple way to save money on taxes. You can use any budgeting app to track your expenses or purchase software to help you out. You can even use services like Mint to monitor your spending habits. Whatever you do, make sure you know where your money is going!
3) Take Above-The-Line Deductions
Above-the-line deductions don’t depend on your income level, so they can be used to save money on taxes no matter what. Some examples of these deductions include student loan interest and alimony payments. If you’re self-employed, you can deduct contributions such as health insurance premiums and retirement savings. Another great way to reduce your tax liability is to participate in a Flexible Savings Account at work. These are accounts that allow you to put pretax money away for childcare or medical expenses. Also, you can add that money into a traditional or Roth IRA, which will only help you save more.
4) Don’t Forget About Tax Benefits For Your Dependents
Tax benefits for dependents may not be the first thing you think of when it comes to saving money on taxes, but they can add up over time. For example, if you pay for childcare, you might be able to take advantage of a tax credit to help offset these costs. In addition, your child might qualify for the Child Tax Credit. If you have a student in college, you can deduct the interest paid on your child’s student loans. You also might consider putting money into a 529 account if you have a newborn or toddler in your home. These accounts allow you to save more of your earnings for future educational expenses, and the tax benefits alone make them worthwhile!
5) Contribute To Your Retirement Fund
Contributing to your retirement fund is one of the best things you can do to save money on taxes. If you have a Flexible Savings Account at work, make sure you are using it to its full potential by contributing as much as you can to that account. You also should consider putting in some extra cash in a traditional or Roth IRA, which could be tax-deducted. If you have a side business or are self-employed, consider putting some of your money into a SEP IRA. Just remember that if you use this option, the maximum contribution is 25% of your net income!
6) Keep Track Of Your Medical Expenses
If you have to pay out-of-pocket for medical expenses, then you must keep track of them. Make sure to save every receipt and document your payments to avoid missing any deduction opportunities come tax time. Also, consider taking advantage of flexible spending accounts if your employer offers them. This allows you to put money away pre-tax so that you can use it on medical expenses throughout the year. If you have a high income, consider buying a health savings account before the open enrollment period ends.
With so many ways to save money on taxes, you might be wondering how to make the most of each opportunity. The best thing you can do is track your expenses and keep tabs on where all your money goes. This way, when tax season comes around, you’ll know what deductions and credits are available for use! Also, keep track of your gas mileage and any charitable contributions you make to take advantage of the tax deductions available for these expenses.