Before it is time to file your tax bill for this year, you should put a little effort into updating your records and finances so you can save more at tax time. There are several strategies you can implement in order to reduce the amount of income tax you owe.
Here are some tips to consider before tax time:
Make Efficient Home Improvements
There are tax credits available for up to as much as 30% of the cost it takes to make your home more energy efficient. Before hitting the home improvement store, make sure you check out the energystar.gov website to see which improvements meet the requirements of the government in order to get the tax credit. Complete the purchases and the work before the end of the year for the tax credit and to save money within your home all year around.
Fill Up Your IRA
Hopefully you have been planning for retirement for a number of years. If you have established an IRA account, now is a good time to make a contribution. For 2011, the maximum amount of money you can contribute to an IRA is $5,000 or $6,000 if you are over the age of 50. If you haven’t set up an account ye, do so before December 31st and you can still deduct contributions up until April 17, 2012 for the 2011 tax year.
Move Some Income
If you anticipate being in a lower tax bracket next year than you are currently, you can cut taxes by shifting income receipts into the next year. These income receipts might include any bonuses that came at the end of the year, self-employment income, or capital gains.
If you have used goods or spare cash to donate to your favorite charities around the holidays, now is the time to do it. Charity organizations can give you the receipt you need as well as a value of your donated goods for your tax deduction. The receipt must contain the date of the donation, the amount, and whether or not you got anything in return as a gift of appreciation. You can even donate a vehicle to an accepting charity.
Fund for College
You can contribute to a 529 college savings fund that is set up for your kids or grandchildren’s college education. You can save money on your state income taxes and help ensure that enough cash is saved and available to pay for pricey college expenses.
Tax deductions can be complex so make sure you work with a qualified CPA to complete your tax forms according to the regulations. A professional who is familiar with the laws may be able to find and suggest deductions you are not aware exist. You may have to spend some money for the assistance but it can certainly be worth it in the end when you save on your overall tax bill.