Ben Franklin once said, “there are only two things certain in life, death and taxes.” This adage holds true still today. In fact, if you have to write a hefty check each April to the government and/or your state of residence, you might wonder which is worse, death or the dreaded tax bill. Although we can’t help you much with the dying part, there are some ways to reduce the amount you will owe on your taxes and they are as follows:
1.) Make a Monetary Charitable Donation
Giving is good for the soul, and as it turns out, it’s not bad for the pocketbook either. By giving to a recognized organization, mission, church, etc, you can successfully reduce your tax bill by deducting your donation. This is a huge benefit that is a win, win, because it obviously helps you by reducing the debt you owe Uncle Sam, but it also benefits the organization at the same time. Just make sure you get a receipt from the organization, proving your donation.
2.) Consider Opening a Flexible Spending Account (FSA)
You can pay for child care and healthcare expenses with pretax dollars using a FSA account. This in essence lowers your tax burden, meaning you will owe less at the end of the year. For 2018, as a married couple filing jointly or single person, you can contribute up to $5,000 for dependent care, and $2,650 for healthcare yearly. For a couple filing separately, you can contribute up to $2,500. It’s important to note, though, that you must use this money only for eligible expenses. Otherwise, you could have to forfeit it.
3.) Create a Home Office
If you have a home office space and are self-employed, you could claim the home office deduction on your taxes. Make sure you use the space primarily for your work, though. For example, don’t claim your kitchen counter as your home office if it also is used for food prep and household activities.
4.) Hire a Professional
Many people shy away from hiring a Certified Public Accountant (CPA) to file their taxes, opting instead to try to figure it out themselves or stop by a seasonal tax office. However, CPA’s understand the complexity of the tax law and know how to get you the most deductions possible. They are worth their weight in gold. Also, if you take the time to create spreadsheets (or at least organize your deductions) for them, which makes entering deductible items into their system easier, you might be surprised how affordable their services can be. Don’t expect them to comb through your shoebox full of receipts for hours, though and not owe a pretty penny.
5.) Schedule Any Needed Last Minute Medical Procedures
Medical procedures/expenses are deductible if you itemize when they exceed 7.5% of your adjusted gross income (AGI). To explain this further, if your AGI is $40,000 and you have medical bills, prescriptions, doctor’s visits, even dental procedures/visits etc. that add up to $,5000, you can claim $2,000 as a deduction. Therefore, if you have any medical procedures you need to do, now’s the time.
6.) Donate Unused/Unwanted Items to Charity
Another way you can help charities and reduce your tax burden is donating clothing, home furnishings and other items to charities. You can deduct the value of the items you donate on your taxes. Keep in mind, though, you have to deduct only the fair market value of these items, which means what they would be worth in their present condition, not what you bought them for years prior.