Did you know that almost 70 million Americans filed tax returns in 2020? During tax filing season, many people look for ways that they can lower their overall tax bill or even get more of a tax refund.
Would you like to learn how to reduce the amount of taxes you owe at the end of the year? Here are some tax reduction strategies that you can apply when you file your tax return.
Donate as Much as You Can
When you get rid of clothes, furniture, or other items, you should always remember to get a donation receipt if you give it to a charity. That way, you can write these items off on your tax return, depending on their size and value.
Any other charitable donations you make can also be written off. You simply need to save the receipt or correspondence. If you donate large amounts to charity, then this could amount to a significant amount of income to write off on your tax return.
Invest in a Retirement Account
If you do not already have a retirement account in some form, you should open one and begin putting money into it every month. This way, you will be able to have a tax write-off and begin building your nest egg for when you leave the workforce.
Most employers offer some type of retirement account with matching contributions, that can be transferred if you change companies. You can also set up your own retirement account, depending on your financial needs and goals.
Open a Health Savings Account
Even if you have a health insurance policy, you should consider opening a health savings account because it is incredibly tax-advantaged. The money going into it is not taxed, and growth is also not taxed.
When you need to withdraw from the account, that withdrawal will be tax-free as well. You can also write off the income that you put into your health savings account, which will reduce taxable income as well.
Time Your Investments
When you manage your capital gains and losses, you can avoid paying additional taxes, such as additional Medicare tax. If you sell your losses and document them for the IRS, you may be eligible for a tax deduction.
If you use an accounting firm or individual for the preparation of your return and other tax services, you may also want to reach out for wealth management and advice. An outside party can help manage your investments if you do not want to.
Use These Tax Reduction Strategies
You do not need to be an expert to implement tax reduction strategies to help you get a larger refund. With these tips, you will be able to get more money back on your next tax return.
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