It is always a bit of a challenge with everything going on in your life to keep tax planning in your thoughts throughout the year. The good news is that if you work with an accountant he or she will typically send you newsletters or emails that will help you remember dates for tax saving programs and other important information.
In general you can help to reduce the amount that you end up paying in taxes by the following:
- Ensure that you maximize your 401K plan contributions. If you are over 50 you can contribute an extra $5, 500 over the standard $17,500 but you have to make sure it is all contributed before the cut-off date of December 31 of the current calendar year.
- If you have an individual retirement plan, also known as an IRA, you can also contribute an extra $1,000 over the standard $5,500 if you are over 50. There is also a difference in the contribution dates with IRA accounts and you can deposit up to the time you file next year’s returns.
- Gifts can help you to save taxes by giving up to a maximum amount of $14,000 per person in the form a charitable contribution to another individual or entity. You can use this gift provision each year but the gift has to be made in the calendar year of the tax filing to be eligible.
- Buying energy saving appliances, those listed as ENERGY STAR and also on the government tax credit list, can help you claim back a portion of the cost of the purchase. Not all appliances that are ENERGY STAR will be on the list and it does change year to year so always look before you buy.
- If you have younger children take full advantage of any child-care reimbursement programs that your employer offers to allow you to pay for child care with pre-tax dollars. This lowers your overall tax burden and will result in overall lower costs to you.
Talk to your accountant about specific programs and plans that you can use to save taxes throughout the year. It will certainly help you when tax season comes around and help reduce any taxes you may be required to pay.