As tax season approaches, and you’re starting to gather everything in preparation to file for the year, there’s a few things that you can do to help lower the amount of taxes you owe and ensure that your income remains solid.
At Flannery & Associates, we’re here and happy to provide some insight into the top strategies to protect your income from taxes.
Plan Ahead with Your Taxes
Individual tax planning is almost as vital as filing your taxes. It gives you the chance to get some things in order ahead of filing your state and federal income taxes. Some helpful tips to prepare would be to update your W-4 with your employer, particularly with raising your withholding so you’ll owe less when tax season rolls around.
However, if you got a particularly large refund the year before, you may want to reduce your withholdings on your W-4.
Through tax planning and projections, simply adjusting your investment income you may be able to:
- Lower your tax bracket and save money
- Qualify for college tax credits that you may not have been able to qualify for in the past
If you live in New Jersey, and are over the age of 62, you can take advantage of Retirement Income Exclusion. Single filers can exclude up to $50,000 of income while married joint filers can exclude up to $100,000.
By doing a tax projection, there are so many small ways that you can plan for tax savings. Investment income is just one small way.
Put Money Away
When you have less income, there’s less to be taxed. You can reduce your tax bill by donating more of your income towards your retirement accounts. These can include your 401K as well as your IRA account. This helps you not only save with your retirement plans, but also reduces your reported income, resulting in less tax on it.
Start Using an HSA Account
A Health Savings Account works if your insurance has a high deductible. You can then put pre-taxed money into it to prepare for any major medical expenses down the line. Not only will these funds not be taxed, but you’ll also earn interest on it, and any un-used funds will roll over into the next year.
Begin a Side Hustle
Having a second source of income is a great idea with not only bringing in more money, but also for the tax benefits. If you run this business out of your home, there are many home expenses that can be deducted—saving you on your taxes.
These deductions can include a portion of your utilities, including your internet and even power bill. Any additional equipment or office supplies needed for the business can also be deducted.
Donate to Charity
Any charitable donations are considered to be tax deductible. However, donations aren’t just in the form of money. You can donate items like clothes, food, appliances, equipment, and more. Keeping an itemized list of all of the things that you donate can help you calculate the deductions that you’re entitled to.
Make a Vacation Out of Your Business Trip
Do you have to travel for work? Why not extend your trip by a few days and turn it into a vacation. This will allow you to not only get some much-needed rest and relaxation, but it can also help you save on your taxes. Travel expenses for work are tax deductible, so part of your trip can be written off and you can enjoy a vacation in the process.
Connect with a Certified Public Accountant
The best way to ensure that you’re protecting your income and getting the most out of your taxes is by hiring an accountant to help you file your state and federal income taxes. When the time comes where you’re looking to save on your taxes and help keep as much of your income as secure as possible, contact us at Flannery & Associates.
