Taxes are a part of life, but overpaying them doesn’t have to be.
There are plenty of strategies to help you pay less on your taxes, including tax deferrals, tax-free investments, and good-old-fashioned planning ahead.
Take a look at some of our favorite tax advantages and see if they could work for you:
BE ON THE LOOKOUT FOR THESE TAX ADVANTAGES
- Tax-Deferred: Tax-Deferred means you don’t owe tax on your earnings now, usually because you don’t have the use of the money.
- Selling Securities: You can avoid taxes on some or all of your capital gains by selling securities on which you are losing money, especially if you think they’re not worth holding on to.
- Home Equity Loans: Since interest on many home equity loans is deductible, while interest on consumer loans and credit cards is not, it may pay to use your home equity credit if you need to borrow money.
- Paying Expenses with Pre-Tax Dollars: Many employers offer flexible spending plans that let you exclude a fixed dollar amount from your salary to pay certain medical and dependent care expenses. Since the money is not included in your salary for tax purposes, you pay less tax.
- Giving to Charity: If you itemize on your tax return, you can deduct charitable contributions, both cash and non-cash.
- Debt Consolidation Loans: One way to lower the cost of debt is to consolidate your debt via a second mortgage or home equity line of credit. Debt consolidation loans provide tax advantages you can’t get with other types of credit. Consult with a financial advisor before taking out this kind of loan to make sure it’s the best way for you to move forward.
Some of these strategies may not be items you can implement, but you can always consult your tax professional to determine if other tax-saving options are available to you.