While taxes can be stressful, it may be tempting to procrastinate—don’t give in to that temptation. By thinking ahead and working with an expert, you can take the hassle of doing your taxes and turn it into an opportunity to keep some of your hard-earned income in your pocket where it belongs. Tax professionals - like the experts at Insogna CPA - can help you to minimize your taxes as much as is legally possible.
Here are 5 ways you can reduce the taxes you pay each year
While tax strategy and minimizing taxes you owe can be a complicated process, here are 5 ways that many business owners can explore to reduce their corporate and personal income taxes every year.
- Contribute to a pre-tax retirement account
- Claim your business deductions
- Check for Earned Income Tax Credit (EITC) eligibility
- Charitable contributions
- Collaborate with a tax professional
Let's get started.
1) Contribute To A Pre-Tax Retirement Account
Contributions to retirement accounts like the traditional 401(k) and IRA are one of the simplest and easiest ways to reduce your tax bill. These are deducted from your taxable income, and therefore reduce the overall amount of federal tax that you owe. Plus, especially if you max out any available employer-matching options, you’re making a serious investment in your future with those tax-deferred dollars.
2) Claim Your Business Deductions
If you own your own business, there are a wealth of tax deductions available to you. Leaving these deductions unclaimed is the same as leaving money on the table. You might be surprised at what you are able to deduct—utilities, wages, employee benefit programs, and advertising, are all options. Work with your advisor to determine whether you have taken advantage of every deduction that you are eligible to claim.
3) Check for Earned Income Tax Credit (EITC) Eligibility
The Earned Income Tax Credit is a benefit for those with lower or moderate income and may reduce the amount of tax that they owe—especially for families with children. The exact amount may vary based on your income, marital status, and a number of children, but if you qualify, you could stand to see a significant cut in the amount of tax you owe, and even in some cases an increased refund. Check to see if you qualify here.
4) Charitable Contributions
Another popular way to reduce your tax bill is to donate to recognized charities. Depending on the amount that you donate, you’ll need to demonstrate proof of your charitable donation with either a receipt and/or a written contemporaneous acknowledgment from the organization. Depending on the donation, other proofs or documentation may be required. Despite the hassle of record-keeping, these donations can add up and save you a bundle when it comes to tax time.
5) Collaborate With A Tax Professional
For complex tax returns, there’s no substitute for working with a professional. Free software can go a long way if your taxes are simple, but if you own a business, are self-employed, or have a significant number of assets, you’ll want an expert’s help. A qualified tax professional like a CPA will be up to date with changing tax laws, and able to help you make the most of your income, assets, and overall financial situation.
If You Are Looking for Legal Ways to Reduce Your Tax Bill Start By Talking With the Tax Experts at Insogna CPA
This is by no means an exhaustive list of the possible ways to minimize what you pay in taxes each year, but it should give you an idea of what’s possible.
When you partner with an experienced CPA firm like Insogna CPA, we’ll work hand-in-hand with you to minimize your taxes as much as is legally possible. By waiting this long, you run the risk of money left on the table, or, worse, incurring penalties from the IRS. So, don’t wait around.
Contact us today to get started.