Avoid unpleasant tax surprises following these tips and strategies. Some require extra time and a tax professional but might be worth the extra effort.
1) Contribute to an IRA You may be able to deduct contributions to a traditional IRA, though how much can depend on whether your spouse is covered by a retirement plan at work and how much they make.
2) Contribute to a 401(k) Less taxable income means less tax, and 401(k)s are a popular way to reduce tax bills.
3) Save for College You can’t deduct your contributions on your federal income taxes but might be able to on state returns if putting money in a state’s 529 plan.
4) Update your W-4 If you received a huge tax bill this year and don’t want another surprise next year, raise your withholding so you owe less when it’s time to file a tax return.
5) Sell underperforming stocks You can deduct losses on stock sales, which can offset any taxable capital gains you might have. (Never let tax avoidance be a substitute for wise investing).
6) Charitable contributions Charitable contributions are deductible, and they don’t even have to be in cash.
7) Earned Income Tax Credit Depending on your earned income, this could be worth looking into.
8) Contribute to an HSA If you have a high-deductible health care plan, you may be able to lighten your tax load by contributing to a health savings account, which is a tax-exempt account can be used to pay medical expenses.
9) Dependent Care FSA If your employer offers a dependent care FSA, this could be a great way to lighten the tax bill while paying for preschool, day care, camp, etc.
10) Medical Expenses Make sure you keep track of your medical expenses as you can deduct a percentage of your qualified medical expenses.
- Doug Myrick
*This information is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not intended to provide specific legal or tax advice and cannot be used to avoid penalties or to promote, market, or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney.
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