Tax Savings Tips for your next tax preparation
What are some good tips on reducing my tax bill?
Here are some tax savings tips as people will be getting ready to file for their taxes from the accountants at Jack Trent & Company CPA. The following should reduce your tax bill.
Donations and securities
Donations or charitable contributions are a great way to take deductions on your income. A good way to do this is donating any kind of long-term securities that you may be holding. This allows a taxpayer to avoid paying taxes un unrealized gains while still getting a tax deduction for charitable donations.
Spending money on medical expenses?
If you are anticipating needing medical care, it might be useful to open a Health Savings Account (HSA). This way, you can contribute to your HSA account which are tax-deductible. A HSA differs from a Flexible spending arrangements (FSA) in that contributions for HSAs can carry over for medical expenses in future tax years.
How can retirement planning help reduce my tax bill?
On the topic of retirement planning, it is advisable to participate in any kind of employer-sponsored retirement plans, especially your employer does any contribution matching. Contributions to are generally tax deductible and the tax deferred contributions will compound faster for greater returns versus retirement plans that are not tax deferred. It is important to note that Roth IRAs are retirement plans that are not tax deductible but qualified distributions are tax-free. Municipal Bonds – Interest earned on these types of investments is tax-exempt.
How can owning a house save me money on my taxes?
One of the biggest itemized deductions that a tax payer can take is the interest on mortgage financing for their house. Mortgage interest and real estate taxes are tax-deductible and helps reduce your tax bill. A tax payer can qualify for a primary residence exclusion from capital gains. You must own and occupy your home as your principal residence for at least two years before you sell it to qualify for the $250,000 / $500,000 (for married jointly) primary residence exclusion from capital gains. Points that were paid for the original purchase of a residence is also tax deductible. Mortgage insurance premiums (MIP) is also usually tax deductible.