Five Easy Ways to Reduce Tax Liability This Year
If you’re saving for retirement, you’re probably playing the long game, focusing solely on how much you’ll earn when you stop working full time. However, there are numerous ways to save on taxes right now, from improving yourself professionally to harnessing alternative energy.
Ready to save on taxes this year? Here are five ways to do it right:
Make Charitable Contributions
Donating to a cause has a dual bonus—you support someone (or something) in need, and you get tax deductions. Some states don’t allow itemized charitable deductions—New Jersey, Massachusetts and West Virginia are examples. But if you live in one of these states, you might consider taking advantage of a recent law that allows individuals over 70 ½ to exclude as much as $100,000 from gross income for donations paid to qualified charities.
Save More for Retirement
If you only dabble as you save for retirement, it’s time to go all in. From 401(k)s to IRAs, you can put away a significant amount of income without getting hit by taxes immediately—or ever. For instance, the government allows you to put away a max of $5,500 per year in your IRA—$1,000 more than that if you’re over 50 by the end of the year. If you have the resources, don’t forget to fund Roth IRAs for your grandchildren as well. As soon as they start earning money, even from a part-time babysitting job, they’re eligible for an IRA.
Go Back to School—for Work
Many employers offer paid training or education meant to improve your performance as an employee. From online courses to college classes to certifications, taking advantage of these educational opportunities can definitely help you save on taxes. Each year, employers can pay a maximum of $5,250 in tax-free educational assistance, enabling you to make professional improvements without paying for them—or the taxes involved.
Green Up Your Home
Solar panels. Wind turbines. Solar hot water heaters and other equipment. By going green with your home, installing equipment to capture energy from alternative sources, you can earn tax credits of as much as 30% of what you spend. Until 2016, there’s no cap on how much you can earn in credits. Green up your home now so you can take advantage of these savings.
Track Your Moving Costs
If you land a new job and you’re moving at least 50 miles beyond where your current home sits, you can deduct the cost of your move, regardless of whether you itemize your expenses. You can deduct two things—your belongings and the cost of moving. Even if you drive your own car, you can deduct per-mile expenses. And don’t forget fees for parking and tolls!
There are dozens of ways to save on taxes each year, some more complex and involved than others. However, having a discussion with one of the members of the Buttonwood Team, an accountant or other professional can help provide a well-rounded strategy for seriously reducing your tax liability. Please contact us at (816) 285-9000 or online.