When you filed your taxes, were you
disappointed to see how much you owed? This can happen to anyone, especially if
you had a particularly good year earnings-wise or if you went through some kind
of change, like becoming self-employed or getting married to a high-earning
spouse.
Whatever the case may be, you’ll be glad to
know that you don’t necessarily have to pay that high tax amount next year and
in the years to come. With the right tax help and by trying out some simple
strategies, chances are that you can significantly lower next year’s tax bill.
Contribute
to Your Retirement Plan
If you’re not already saving for retirement,
it’s time to start, no matter how young you are. Not only do you need to plan
for the future, but you can also enjoy some nice tax incentives as a result.
With a traditional IRA or a 401(k), for
example, all of your contributions are completely tax free. In fact, with an
IRA, you can contribute up to $6000 if you’re under 50 and up to $7000 if
you’re 50 or older. And, with a 401(k), the limits are $19,500 for those under
50 and $26,000 for those 50 or older.
So, as you can see, some smart contributing
can help your future and your current tax situation as well. Work with your tax
professional to open an account and/or to start planning your contributions in
a way that will benefit you.
Ditch
Bad Investments
Not every investment you make is going to be
successful. Your job, though, is to comb through your investments from time to
time and to pick out the stocks or other funds that aren’t performing as well
as you’d like. From there, you can sell them at a loss. And, while that may
seem like a bad thing, it can actually lower your tax liability since you’ll be
able to offset any investment gains you may be taxed on.
If all of that sounds a bit too complex, don’t
worry! A good financial advisor can do everything from helping you identify and
sell your underperforming investments to showing you how to record the sales on
your taxes.
Believe it or not, these are just a few of
many possible strategies for reducing your tax bill next year! For even more
great tips and to get set up for a better, brighter financial future all
around, never underestimate the power of working with a professional.