5 Quick Ways to Reduce Your Tax Bill

I have yet to meet a single person who loves paying taxes. Sure we all love the benefits that we get out of them: emergency services, hospitals, roads without potholes, and a host of other benefits. But when it comes down to it, we all want to reduce our tax bill as much as possible. As an accountant in Billings, Montana, we want to help you keep as much money in your pocket as possible. Here are the 5 easiest ways to keep your tax bill down.

Reduce Taxes: Invest in Yourself

As long as you meet the income requirements (for 2014 you can make as much as $60,000 as a single person, or $96,000 as married filing jointly; if you don’t have access to an employer plan those limits are lifted for single and $181,000 for married filing jointly), you can contribute to a traditional IRA.

A traditional IRA helps those who want to save on their taxes now, but keep in mind that taxes will come due eventually. Suppose you put $5,500 into your IRA (the current limit for those 55 and younger; 55 and older can do $6,500) this year. You can then deduct $5,500 off of this year’s income. However, when you withdraw that money during retirement, you will owe taxes as though the money was earned the year you take it out.

To get your tax bill down for this year, put more into your IRA.

Reduce Taxes: Invest in Others

One of the easiest ways to do good with your money is to donate to charities. There are thousands of worthwhile organizations across the country, but I would suggest you donate to a local group. From churches, to homeless shelters, to community groups, there is surely a charity out there that you would like to support. The good news is that you can give away as much of your money as you would like. Even if that means you donate $100,000 to a group, you can write off the $100,000 from your current income. Be sure to check out charitynavigator.org before you send just anyone money though; you will want to make sure they are legitimate.

Reduce Taxes: Take a Stock Loss

Do you have investments that just aren’t cutting it? You can sell them and write the loss off on your taxes. As hard as it is to invest money and get less money back, it can be an effective tool to reduce your tax bill. Keep in mind though, that selling a stock to capture that loss prevents you from buying back into the same stock for 30 days. If you do, it’s a wash sale and your losses won’t help you.

Reduce Taxes: Contribute to a Health Savings Account

If you have a high deductible health insurance plan, you may be eligible to open a Health Savings Account (HSA). This unique plan allows you to pay for medical expenses with before-tax money. Unlike a flex plan offered through work, the HSA money doesn’t expire at the end of the year. Keep in mind that the money must be used for health related items, but can’t be used for OTC medications.

Reduce Taxes: Hire an Accountant

Yes, it may seem counter intuitive, but one of the best ways to save money is to spend it. An accountant, such as Mike here at A+ Accounting, can actually help you get a bigger refund on your taxes. By legally utilizing the tax laws, an accountant will find every deductible that you qualify for. Many of these you wouldn’t have known about and subsequently would have missed. Not only that, but you will save a whole lot of time by letting someone else prepare your taxes.

Reducing your tax bill is the goal of just about every American. Before 2015 rolls around, take a few minutes to see if you can take advantage of any of these tips to keep your liability as low as possible. When it comes time to file that return, an accountant in Billings, Montana will help you get the biggest refund check possible.

Practical Taxes

Practical Taxes is a full service accounting firm in Billings, Montana. We can help you get the most from your taxes, and make sure that you will get the maximum refund every year. But we don’t just do taxes! We can help with your bookkeeping, payroll, bank reconciliation, budgeting, and more. Give us a call at 406-894-2090 to learn more.