Tax season is right around the corner, and it's time to start thinking about how you can save money on your taxes. There are a number of different things you can do to reduce your tax liability, and the amount of savings you can achieve can be significant.
Here are five ways to save money on taxes this year:
Take advantage of all the tax deductions and credits you are eligible for. There are a number of different tax deductions and credits available to individuals, families, and businesses. Some of the most common tax deductions include mortgage interest, state and local taxes, and charitable contributions. Some of the most common tax credits include the child tax credit, the earned income tax credit, and the American opportunity tax credit.
You can use the IRS tax deduction and credit finder to determine which tax deductions and credits you are eligible for.
Maximize your retirement account contributions. Contributions to traditional IRAs and 401(k) plans are made with pre-tax dollars, which means that they reduce your taxable income. This can lead to significant tax savings, especially if you have a high income.
In 2023, the contribution limit for traditional IRAs is $6,000 ($7,000 for catch-up contributions for those age 50 and older). The contribution limit for 401(k) plans is $20,500 ($27,000 for catch-up contributions for those age 50 and older).
Deduct your business expenses. If you are a small business owner, you can deduct most of the expenses you incur in running your business. This includes expenses such as rent, utilities, office supplies, and travel expenses.
You can also deduct the cost of depreciation over time. Depreciation is a way to spread the cost of certain assets, such as furniture and equipment, over their useful life.
Itemize your deductions. If your itemized deductions exceed the standard deduction, you should itemize your deductions on your tax return. Itemized deductions include things like mortgage interest, state and local taxes, and charitable contributions.
The standard deduction for 2023 is $12,950 for single filers and $25,900 for married couples filing jointly.
Hire a tax professional. If you have a complex tax situation, or if you are not sure which tax deductions and credits you are eligible for, you should hire a tax professional. A tax professional can help you prepare your tax return and make sure that you are taking advantage of all the tax savings opportunities available to you. Give us a call for a free consultation.
Here are some additional tips for saving money on taxes:
Start planning early. The sooner you start planning, the more time you will have to gather the necessary documentation and file the appropriate forms.
Be organized. Keep good records of your expenses and income. This will make it easier to file your taxes and claim the deductions and credits you are eligible for.
Use tax preparation software. Tax preparation software can help you prepare your tax return and make sure that you are taking advantage of all the tax savings opportunities available to you.
E-file your tax return. E-filing is the fastest and most accurate way to file your tax return.
By following these tips, you can save money on your taxes this year.