If two things in life are certain, they are death and taxes. However, one thing that is far from certain is how much in tax you will pay. As soaring inflation continues to bite, speculation over dramatic tax rises for Americans is currently rife.
If you want to reduce the pinch in 2022, we’re here to tell you how to save money on taxes. You don’t need to be an accounting whizz to understand the basics of saving on taxes. All you need is a basic understanding of the write-offs available to you. Read on to find out how to pay taxes and make big savings this tax season.
1. Consider The Assets You Use For Work
One of the easiest ways to save money when filing taxes is to deduct any and all work-related expenses. Some of the most obvious ones include home office deductions and, for entrepreneurs, loss deductions. However, there are other deductions that might surprise you.
For example, if you drive a G-Wagon and use it for business activities, then you can apply for a G Wagon Tax Write Off, allowing you to potentially save thousands of dollars on your next tax bill. If Uncle Sam offers a deduction like this, you take it with both hands.
2. Max Out Your Contributions
The Government wants you to start saving for retirement and planning for your future. One way it incentivizes this is by giving retirement savers ways to offset their contributions by paying less in taxes.
The more you put into your IRA or 401K, the lower your income tax bill will be. For example, all 401K contributions up to $20,500 per year are tax-deductible, so start saving now.
3. Log Your Medical Expenses
We all have medical expenses, whether it is for surgery or a routine checkup. The key is to take advantage of the tax tips and tricks that allow you to deduct these unavoidable expenses from your tax bill.
As a general rule, any medical expense that exceeds 7.5% of your gross income for the tax year is fully deductible. That’s why you should keep a log of all medical bills and receipts for every tax year.
4. Save for College
As we have seen already, Uncle Sam likes taxpayers who plan for their future. On top of retirement deductions, you can also write off college fund contributions via a 529 Plan.
This plan will be administered by the government or by a university and allows you to deduct your contributions for college fees from your annual tax bill. This applies whether you are saving for your own college fund or for a family member’s, so make sure to sign-up for this one.
5. Grab Your Tax Credits
Finally, do not forget about the holy grail that is tax credits. If you have kids, work a low-wage job, have a registered disability, or use solar panels to power your home, you are entitled to tax credits.
These allow you to offset part or all of specific relevant costs from your tax bill so that you can shore up your financial future.
Hacks For How To Save Money On Taxes
Now that you know the basics of how to save money on taxes, it’s time to dig deeper. In our dedicated Money guides, you will find insider advice on how to make your money work for you, in every respect. Check it out today to future-proof your finances.