Financial Consultant: Top 10 Tax Saving Tips

June 23, 2022 0 Comments

W-2 employees have tax options. Although they often feel left out of the tax cycle, those who work for W-2 payroll have a wide variety of options to save money at tax time. The secret to getting the best tax benefits is knowing what your options are and using all the options available to you.

1. Keep all receipts related to the business. IF you buy something necessary for your job and your employer does NOT reimburse you, that item may be deductible to you as a ‘work-related expense’. As a habit, save all receipts for work-related expenses.

2. Be aware of all deduction options. When you know what deductions you can take at the beginning of the year, you’re more likely to save money later in the year on your tax debt. Work-related travel, safe deposit boxes and more are deductible if you choose to itemize.

3. Don’t lose tax credits. Tax credits are created to benefit those who have unusual expenses during the year that are not legally deductible. Using tax credits provides a benefit of cash back toward your expenses when you qualify.

4. Consider tax-free investments. When you invest money for retirement benefits or education, consider a tax-free investment. The lower value of the returns can be balanced with the reduction in the taxation of the investment.

5. Take a loss. Occasionally, the reward for selling an investment at an apparent loss can result in a drastic reduction in your tax liability, benefiting from less money spent and more money earned. Your tax advisor can guide you, but you’ll need your tax information before the end of the year.

6. Charitable donations. More than money, your donations to charity are deductible. If you donate clothing, furniture or other merchandise to a recognized charity, get a receipt and use it as a tax deduction. Mileage driven for charitable purposes is also deductible.

7. Gifts: Giving saves you money. If you are retired and your children must inherit a large sum of money, giving them the maximum amount allowed each year is often preferable to maintaining a large estate and paying estate taxes. Consider gifting your children and allowing them to enjoy their inheritance early. (Your tax advisor will also have other options for saving your retirement tax money.)

8. Maximize your Retirement Contributions. If you’re in that ‘other category’ too young to retire, too old to have children for deductions, it’s often recommended that you max out your retirement contributions. This contribution can save you money at any time and provide you with a viable option for retirement.

9. Put the kids on the payroll. For legitimate expenses, if you pay your children (over 14 years old) for deductible expenses, pay them a check and pay taxes. let them pay

their own expenses with the money they earn.

10. Double check your tax documents. Many mistakes are made on tax documents that would save you money if caught before taxes are filed. EVEN if you have a competent tax preparer/advisor doing your taxes, double check the numbers, location of numbers, and items on your tax documents to verify they are correct. Accounting errors can cost you money.

Having a tax preparer who willingly offers information about your taxable income and deductions provides a much better service than a minimum service where you pay less, but end up paying more in taxes. Consider the additional amount you are paying in taxes without a quality consultation, when considering the Fee of your Tax Advisor.

Leave a Reply

Your email address will not be published. Required fields are marked *