Top 7 Ways To Minimize Your Income Taxes

Top 7 Ways to​ Minimize Your Income Taxes
Are you​ paying too much in​ income taxes? Are you​ getting all the​ credits and deductions you​ are entitled to? Here are 7 tips to​ help you​ minimize taxes and keep more in​ your pocket:
1 .​
Participate in​ company retirement plans .​
Every dollar you​ contribute will reduce your taxable income and thus your income taxes .​
Similarly,​ enroll in​ your company’s flexible spending account .​
you​ can set aside money for medical expenses and day care expenses .​
This money is​ use it​ or​ lose it​ so make sure you​ estimate well!
2 .​
Make sure you​ pay in​ enough taxes to​ avoid penalties .​
Uncle Sam charges interest and penalties if​ you​ don’t pay in​ at​ least 90% of​ your current year taxes or​ 100% of​ last year’s tax liability .​

3 .​
Buy a​ house .​
the​ mortgage interest and real estate taxes are deductible,​ and may allow you​ to​ itemize other deductions such as​ property taxes and charitable donations .​

4 .​
Keep your house for at​ least two years .​
One of​ the​ best tax breaks available today is​ the​ home sale exclusion,​ which allows you​ to​ exclude up to​ $250,​000 ($500,​000 for joint filers) of​ profit on​ the​ sale of​ your home from your income .​
However,​ you​ must have owned and lived in​ your home for at​ least two years to​ qualify for the​ exclusion.
5 .​
Time your investment sales .​
If your income is​ higher than expected,​ sell some of​ your losers to​ reduce taxable income .​
If you​ will be selling a​ mutual fund,​ sell before the​ year-end distributions to​ avoid taxes on​ the​ upcoming dividend or​ capital gain .​
Also,​ you​ should allocate tax efficient investments to​ your taxable accounts and non-efficient investments to​ your retirement accounts,​ to​ reduce the​ tax you​ pay on​ interest,​ dividends and capital gains.
6 .​
If you’re retired,​ plan your retirement plan distributions carefully .​
If a​ retirement plan distribution will push you​ into a​ higher tax bracket,​ consider taking money out of​ taxable investments to​ keep you​ in​ the​ lower tax bracket .​
Also,​ pay attention to​ the​ 59-½ age limit .​
Withdrawals taken before this age can result in​ penalties in​ addition to​ income taxes.
7 .​
Bunch your expenses .​
Certain expenses must exceed a​ minimum before you​ can deduct them (medical expenses must exceed 7.5% of​ your adjusted gross income and miscellaneous expenses such as​ tax preparation fees must exceed 2% of​ your AGI) .​
in​ order to​ deduct these expenses,​ you​ may need to​ bunch these types of​ expenses into a​ single year to​ get above the​ minimum .​
to​ achieve this,​ you​ might prepay medical and miscellaneous expenses on​ December 31 to​ get above the​ minimum amount.
The most important thing is​ to​ be aware of​ the​ tax deductions and credits that apply to​ you​ and to​ plan for taxable events .​
And don’t be afraid to​ ask for help .​
the​ benefits from consulting an​ experienced tax professional far outweigh the​ cost to​ hire that professional.
Top 7 Ways To Minimize Your Income Taxes Top 7 Ways To Minimize Your Income Taxes Reviewed by Henda Yesti on July 05, 2018 Rating: 5

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