Who wouldn’t want to know ways to pay fewer taxes? And legally! When prices are rising and our salaries and pay packets are just not keeping pace, any ways that we can maximize our income are welcome – especially if we don’t have to work longer and harder to do it. These ways to pay fewer taxes are not universal but there may well be something in this list you’re missing out on.
1. Make Use of Simple Tax Credits
One of many ways to pay fewer taxes is to take advantage of the earned income tax credit. This particular option is quite useful for low to moderate income taxpayers, especially for the ones who don't earn in excess of $50,000. The limit for the credit may vary a little from state to state, but you can definitely save up to $6,000 in most of the cases.
2. Tax Relief for Energy-Efficient Home Improvements
Do you know one of the better ways to reduce your tax bill is to make energy-efficient home improvements? Homeowners can qualify for a federal tax credit if they take steps to make their home more energy efficient. In fact, the federal government is willing to offer tax credits if you're ready to make certain moves, including installing insulation, installing sophisticated cooling and heating systems, and getting new doors and windows. Taxpayers can also keep their tax bill to a lower side by installing solar panels or using alternative energy sources.
3. Have a Family Life with Kids
I know this is drastic and even controversial but it certainly needs to be in your discussions about having children, and god forbid that this the only reason you would ever go ahead, but one of many ways to reduce taxes is to have kids. If you haven't been able to convince your partner about having kids, tell them it might help lower taxes. This could be a motivating factor, as there are quite a few child-related tax deductions and credits available – the child tax credit is one good example that would help save up to $1,000 from your total tax. Remember, this method of reducing a tax bill may not help you much if you're a high earner.
4. Make Charitable Donations
So, you're a woman with a kind heart and are always ready to help the needy. Do you ever consider making a charitable donation that would help the poor and, at the same time, would offer certain tax related benefits? It's possible. Many charitable contributions are tax-deductible. When you make a donation, you simply need to itemize deductions on your tax return, and the federal government may offer an income tax deduction for your gift. The only thing is that the gift needs to go to a 'qualified' charitable organization.
5. Take Advantage of Gift Splitting
Are you a married woman? There's some good news for you. You can take advantage of a taxation rule called 'Gift Splitting' and save a lot of tax money in the process. It is quite like donating to 'eligible' charitable organizations and then receiving tax deductions. The only thing is that you can increase your total gift tax exemption amount by splitting the total gift's value among your family members. There are certain requirements for sure, but you can definitely consider it one of many ways to cut your tax bill.
6. Focusing on Health
Focusing on health or keeping track of your medical expenses can definitely be a way to pay fewer taxes. In order to take advantage of this particular tip, you need to have a healthcare flexible spending account. If your employer offers this type of an account, you may end up qualifying for a tax break of up to 40% on several routine health-related expenses, including acupuncture and supplies such as breast pumps, bandages, etc. Women may also be reimbursed for using smoking cessation programs, gluten-free foods, and starting doctor-ordered weight loss programs. For eligible items, pay a visit to IRS.GOV.
7. Mortgage Interest Deduction
Using mortgage interest payments for tax deduction is probably the oldest trick of reducing tax. All you have to do is keep your mortgage for as long as possible and you may qualify for a tax deduction. Just bear in mind that you should not go overboard with the idea or else the additional interest payments will become greater than the tax benefit you receive.
There are lots of ways to pay fewer taxes. The difficulty really comes in knowing what they are. If you don’t employ an accountant – and seriously, how many of us ordinary gals do – the only option we have, unless we pay for a financial advisor, is to read up and research. It’s certainly worth investigating, don’t you think?