As New Year is coming, you will be planning for large purchases or gifts but along with that keep in mind that the tax season, 15th January is also not so far and think how your taxes may be impacted as well. But don’t worry we are here with a cluster of useful methods to aid you in reducing your taxable income. These are great tips to make use of all through the year when a need arises.
Medical bills – You must keep all the receipts of medical bills, recommendation, and co-pays if you are not using a health savings account. You are eligible to take a deduction that will decrease your tax liability if your medical cost exceeds more than 7.5% of your adjusted gross income (AGI).
Endow in a retirement account – You can keep a maximum of $16,500 dollars to your 401K account every twelve months. Putting money in retirement saving account can lower your tax liability by giving you a tax credit.
Purchase a house – If you are living on rent then it does not provide you with a tax profit. Being the owner of a home not only means you are building equity, but it also lowers your tax liability since mortgage interest is a tax deduction if you convene the income necessities.
Buy a car – The state and the local government permits you to take deductions of certain new cars, light trucks, motorcycles, and motorhomes. This can lower your tax liability.
Craft an altruistic donation – Charitable donations are a magnificent way to add an institute or entity in need and decrease your taxable income for the subsequent income tax season. Majority of the people ignore to keep the records of donations given and hence they miss out the deduction for which they are eligible for.
Make an additional mortgage payment – Your home mortgage payment is probably the largest monthly expenditure in your family unit. You can make use of your income tax refund to make an extra payment, or two. If you make one extra mortgage payment each financial year, you can reduce the lifetime of your loan by up to 5 years.
Pay your property taxes – Real estate taxes are tax deductible. If your property tax bill is due early next year, you can pay it now and take the advantage of the deduction.
Avoid the gift tax – You might be surprised but gift over $13,000 is also taxable. You can avoid gift tax by giving a gift of $13000 or less per year per individual. Gifts over that sum will decrease your lifetime gift tax exclusion, and gifts over the exclusion will be taxed to the giver.
Give a thought Withholding 2019
Hence summarizing, n short, now it is time to start preparing for the tax and keep a watch on the recent news so that you can take advantage of all tax deductions and exemptions you are eligible for