Thursday, December 5, 2013, AM | Leave Comment
Each year, Americans dutifully file their personal income tax return to the government. This return lists your income, business gains and losses as well as any deductions to your income. What are some deductions that you may be eligible for that could reduce your tax rate this year and in future years?
Take The Earned Income Credit
If you have kids, the EIC is one of the biggest tax credits that you can claim. The amount of the credit is calculated based on your income as well as how many children you have. Taxpayers who don’t have kids may be able to take the credit if they make less than $13,000 a year.
Student Loan Interest Can Be Deducted
No one likes to repay their college loans. However, the interest on your loans could save you money on your taxes. Up to $2,500 of qualified higher education expenses can be deducted from your taxable income each year.
Fund Your Retirement
Small business owners can fund their SEP or solo 401k plans and take a full deduction on their taxes. Employees of any company can put up to $17,500 of wages into their 401k as well. You can also put up to $5,500 into an IRA or $6,500 if you are over the age of 50. Payroll services such as those found on ADP.com can help you keep track of any deductions for yourself and your employees throughout the year.
Consider All Of Your Business Expenses
Business expenses can lower your income for the year. Common business expenses include rent, paying employees and an extra phone line for your business. Advertising expenses as well as the use of a company car can also be deducted.
Defer Income Until Next Year
You only pay taxes based on income received during the tax year. If you don’t want to pay taxes on $100,000 of income, you can have some of that deferred until next year. This strategy works well if you anticipate that you will make less in the following year.
Taxes are hated by everyone who has to pay them. Although you can’t shield all of your money from the government, you can take steps to dramatically lower the amount that you owe. Whether you fund your retirement, take advantage of tax breaks associated with your children or maximize business deductions, you can save hundreds or thousands of dollars each year through careful tax planning.Facebook.com/doable.finance