1. Put more money in your retirement. The best way to reduce your taxable income is to save for retirement with IRA 401 (k) and other tax-advantaged accounts for retirement savings. The board at the top of our list because the amount you can save is big enough to have a real impact on your taxes. All children under 50 can save $ 17,500 a 401 (k) this year and another $ 5,500 in an IRA. If you have 50 years or more, these limits are even higher, reaching a maximum of $ 23,000 for 401 (k) s, and $ 6,500 for IRA. Its use in combination may cut thousands of your tax bill.
2. Keep winning more investment. When the stock market is rising, many people sell off their winners quickly to ensure that their paper profits turn into losses. But this form of short-term thinking allows you to pay much higher rates in the short-term benefits, with some lost more than half of their income to federal and state taxpayers. If you hold the investment to earn more than a year, you get much lower rates of capital gains in the long term, which can reduce income taxes by half your bill - or even completely eliminate for some low-income taxpayers.
3. Check out the tax-free municipal bonds. With these low interest rates they are paying taxes insignificant amount of income you can earn from bank CDs and bonds most only adds insult to injury. But, especially if you are on a level high enough taxes, you have to take a closer look at the tax-free municipal bonds for income. Currently, the Muni bond market is in a somewhat unusual position in which the benefits are greater than what you get from bank accounts insured by the FDIC or Treasury, even before taking into account tax benefit. So do not ignore municipal bonds as a potential source of valuable income and tax savings.
4.check at the end of the year, but may have had to pay penalties and interest. Push your refusal to have enough money braked to avoid penalties is a smart move. Remember to have lots moderation is also a mistake, as it basically gives the IRS an interest free loan of your hard earned salary.
5. Become familiar with tax credits and deductions. The tax code has a wide range of provisions that allow you to reduce your tax liability, but if you do not know about them, you can take advantage of them. Deductions and tax credits are available in spending costs childcare and charitable donations and spending on upgrades, so make sure to make the most of the expenses already do this year.
