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5 tips on how to save money on your taxes

5 tips on how to save money on your taxes

It’s getting close to that dreaded time of year again. Even if you lock the door and hide out in the basement you can’t escape it.  That’s right – tax season is upon us. Unfortunately, it can’t be escaped. But there are ways that you can make this season a little bit better than the last. There are a few things that you can do to get more out of your return this year. Here are five tips to make sure your tax saving strategy is the best it can be.download (60)

Earned income tax credit

Many people qualify for the earned income tax credit and don’t even realize. If you make less than $50,000 a year then this is something you should look into. You can earn up to $6,000 back if you do qualify. If you’ve had any children since you last checked, check again because your eligibility may have changed.

Start a business

If you became a business owner and entrepreneur in the last year then you have a lot of flexibility when it comes to paying taxes. Business owners are able to keep money in their businesses and therefore not claim it as income. Therefore, no taxes need to be paid on it. There are also certain costs that can be seen as expenses. For more information on this consult a professional that knows the rules as they can be complicated and lengthy.

Don’t pay off your mortgage right away

This sounds strange. Keep your mortgage to save money? Your mortgage interest payments are tax deductible. It can be beneficial to a homeowner, when thinking about taxes, to keep your mortgage for a long time. But before your try out this strategy, see how much you would get back versus how much the interests payments cost. If you won’t be saving as much as the costs, then try and pay off your mortgage as fast as possible.

Save for retirement

If you can put more of your paycheck into a retirement savings account, such as a 401(k) or an IRA, you lower the amount that you have to put into your taxes. Another benefit is that the money is going into savings for you to tap into later on. I know it may be hard to keep money out of your pocket initially, but in the long run it’s a good strategy.

Donate money

This again, sounds like a strange strategy to save money. But if you give money away to charities it is considered a tax-deductible gift. This isn’t the only kind of tax-deductible gift either. You are allowed to give up to $13,000 to each child you have. Be giving and see yourself get some tax exemptions, it really is a win-win.