Introduction – Tax Savings Strategies
You’ve survived another year. Let’s look at how you can make the most of your earned tax savings.
Here are a few of my favorite ways to save money on taxes and make sure you don’t overpay:
Best tax savings strategies
Tax season is coming up quickly, so now is the time to start thinking about how to save money on taxes by using smart strategies.
You can save money on taxes in several ways. Here are some things you can do this year to lower your tax bill:
Medical deductions – Tax Savings Strategies
Medical costs are tax-deductible, but some rules must be followed. Medical bills that cost more than 10% of your adjusted gross income can be written off (AGI). 7.5% is the limit for people who work for themselves.
You can also claim medical costs for your spouse and children under 17 who are financially dependent on you. You can spend as much as you want on any person or dependent.
Any cost you pay during the year, even a copayment, is eligible as long as it is medically necessary and not cosmetic or experimental.
FSA options – Tax Savings Strategies
FSAs, or Flexible Spending Accounts, are a great way to save money on your taxes. An FSA gives you a place to save pre-tax money that you can use to pay for out-of-pocket medical costs that aren’t covered by your health plans, like prescriptions, dental work, vision care, and other health care costs.
You don’t have to worry about paying more taxes because the money comes out of your paycheck before taxes are taken out and is used to pay your deductible and other out-of-pocket costs like copays.
The IRS doesn’t require you to tell them how you’ll use the money in your FSA account. As long as it’s for medical expenses, you can use it however you like.
Lifetime Learning Credit – Tax Savings Strategies
People who pay for qualified education costs can get full-time Learning credit. Tuition and fees, books, supplies, and equipment needed for a certain course of study, as well as transportation costs, are all examples of qualified expenses.
If you owe money in taxes, you can use the Lifetime Learning credit to lower your tax bill by 20% of up to $2,000 in qualifying expenses (or 10% if you file as head of household).
If you don’t owe enough taxes to cover all eligible expenses with this credit, say because your income is too low, it becomes a nonrefundable credit that lowers how much of your income is taxed. It doesn’t give back any of the money you saved on taxes.
On their tax returns, single parents or married couples with children under 18 can claim the full-time learning credit (but only one parent needs to be eligible). It can be taken even if neither parent thinks the student needs them.
Energy tax savings credits – Tax Savings Strategies
With energy tax credits, there are many ways to save money on your tax bill. Installing solar panels, geothermal heating, air conditioning systems, wind turbines, fuel cells, or a combination of these is eligible for a tax credit.
Depending on what you bought, you might be able to get a tax credit for 30% or more of the cost of installation. This can save you hundreds of dollars each year on your overall tax bill.
Homeowners can appeal property taxes
There are ways to save money on your property taxes if you own your own home. You can argue about how much your home is worth and try to get it lowered.
You can also lower your homeowner’s association (HOA) fees by showing up to meetings, voicing your concerns, and making suggestions about how money should be spent.
If you don’t want to challenge your property’s assessed value but still want to pay less in property taxes, you could do the following:
Look at what improvements you could make that would increase the value of your home while keeping costs down. For example, you could switch from natural gas heating and cooling systems to electric ones. Then, compare the costs of making those improvements to the costs of buying a new home with the same features already built in.
Consider selling if you think tax savings rates will go up a lot in the next few years, especially if you haven’t got much room left for more depreciation deductions because you just did a lot of repairs or updates.
Moving to a state with a lower tax burden
If you move to a state with fewer taxes, you can save money on your taxes. Florida, Nevada, and Texas are some examples of states with fewer tax burdens.
Use this calculator from the Tax Foundation to find out how much money you will save if you move from your current state to one of these three states.
But keep in mind that some states don’t have sales tax breaks but have high-income taxes. For example, Washington State doesn’t have a sales tax, but people who make more than $10 million have to pay 13% more in income tax.
If you want to move there because of the lower cost of living and cheaper homes, but you also want to pay off your mortgage quickly (which means buying a house), you might want to move somewhere else.
Owning property, having savings, and giving to charity can all help save you money on taxes
For homeowners, the mortgage interest deduction is a big deal. If you itemize your deductions, you can deduct the interest on up to $750,000 of home loan debt ($375,000 if you are married and filing separately).
If you’re married and filing jointly, this deduction starts to go away at 10% of the amount by which your AGI is more than $109,000. It goes away completely if your AGI is more than $134,949 (or $67,097 if you’re single).
As long as you live in your home full-time and don’t use it as an Airbnb or vacation rental, it doesn’t qualify for this tax savings code section.
Conclusion of Tax Savings Strategies
In this post best tax savings Strategies 2023, we’ve talked about a lot of ways to save money on your taxes. However, there are still many more ways to do so.
One important thing to remember is that the less taxable income you have, such as by putting money into a retirement account or buying deductions and credits, the fewer taxes you’ll pay each year.
Don’t forget that even if it seems like you’re fighting uphill, it will pay off in the end.
Whether you have a lot saved or are just starting with a few hundred dollars a month, being aware of how much money goes toward things like health insurance premiums, childcare costs, and property taxes will help your savings grow.
Do you have questions about how to find your ideal niche? Let us know in the comments below!
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