5 Ways To Pay Less In Taxes By Reducing Your Taxable Income

There is a smarter way to approach ways pay less taxes, and it starts with knowing a few key details. This guide covers them, along with tips you can apply immediately.

Key Takeaways

• For numerous people making a few small changes in their finances can lead to much less of their income being taxable.
• The less of your income that is taxable in a given year, the less you’ll pay in taxes!
• Some of the changes are aspects you should be doing anyway, like saving for retirement, so let’s take a look.
• Worth noting: what are some changes that you can make that can reduce your taxable income and save you money?

Tips That Make a Difference

SharePin53Tweet39Share799 SharesEarlier this month I released the 2014 federal income tax rates, and talked about how your marginal tax rates can change quite a bit depending on how much of your income is taxable. Contribute To Your Pre-Tax Retirement Account If you have a pre-tax retirement account like a 401(k) through your employer, you can make additional contributions to your retirement and reduce your taxable income.

You can contribute up to the maximum of $17,500, and reduce your taxable income by that amount.  Don’t forget that you can also contribute for the previous tax year right up until tax day in April! Pay yourself first, and save on your taxes!

Common Mistakes to Avoid

More importantly, contribute To Your Pre-Tax Health Savings Account (HSA) If you have a health savings account along with a high deductible health plan, you can contribute pre-tax to your HSA all the method up until tax day. So for the 2014 tax year for instance, you could contribute up to $3,300 for an individual or $6,550 for a family right up until April 15th 2014.

The excellent aspect about the HSA is, like a 401(k) you’re essentially saving money that you should be saving anyway, and in the end you’ll save on taxes!  The money you save for health expenses will also roll over from year to year, making it a solid alternate method to save for retirement. Contribute To Your Pre-Tax Flexible Spending Account (FSA) If you have a flexible spending account that you’re contributing to, you can also be sure to set the contribution amount for the year greater at plan election time.  At the current time the maximum you can contribute to a FSA account is $2,500 per plan.

Is Ways Pay Less Taxes Worth It?

Remember that so if you and your spouse have a FSA available you’d each be able to contribute $2,500. Remember that the FSA (unlike the HSA) is a apply it or lose it type plan, so if you don’t apply the amount that you’ve elected for that  year, you’ll lose that money.  So be careful when you decide how much to contribute to your FSA.

Provide To A Qualified Charity If you provide to a qualified local charity, veterans organization or to your church, your donations can be used to reduce the amount of your income that is taxable. If you’re giving 10% of your income to your church alone, that can be quite a bit of money that won’t be taxed.  If you’re finding that you’re well over a certain tax bracket and wish to drop down, make an added donation before the end of the year!

Where the Real Savings Hide

As a rule, be sure to know the rules before donating as you may require to have a receipt, and only certain organizations are qualified. Prepay Your Property Taxes If you have real estate taxes that are due in the following year, pay them early in the current year, and you’ll be able to deduct those payments from taxable income in the current tax year.

Prepay Your Mortgage If you have a mortgage on your home, consider prepaying your mortgage payments to have the interest paid counted against the current year. Remember, prepaying the mortgage payment or property taxes in the current year will mean you pay less the following year.  So this should be done if you’re trying to get your income below a certain level for the current year.

A Closer Look at Ways Pay Less Taxes

In short, other Upsides Of Reduced Taxable Income Paying less in taxes is not the only upside of reducing your taxable income. Another upside is that by reducing your taxable income you might become eligible for certain income based tax credits and tax deductions, like the health insurance premium tax credit that went into effect in 2014 with Obamacare.

What other methods have you found to reduce your taxable income?  Just how much have you been able to reduce your income by this year? Methods To Make Added Money Series: 5 Straightforward Methods to Create IncomeWe've had two days full of income creating concepts.  Are you after even more methods to make added money?

What to Know About Ways Pay Less Taxes

Worth noting: solid, let's get started! Budgeting… Lending Club Income And TaxesIf you made interest income on your Lending Club account, you'll require to report that income on your taxes, even if you don't get a… Pointers For Self-Preparing And Filing Your Income TaxesIf you're preparing to file your own taxes this year, here are some pointers to make aspects easier.

Frequently Asked Questions

How can I save money on ways pay less taxes?

Compare prices across a few retailers, look for active coupon codes, and time bigger buys around sales events. Contribute To Your Pre-Tax Retirement Account If you have a pre-tax retirement account like a 401(k) through your employer, you can make additional contributions to your retirement and reduce your taxable income.

Is it worth shopping around for ways pay less taxes?

Usually yes. You can contribute up to the maximum of $17,500, and reduce your taxable income by that amount.  Don’t forget that you can also contribute for the previous tax year right up until tax day in April!.

What should I check before buying?

Read the terms, confirm any code still works, and factor in shipping or returns. Pay yourself first, and save on your taxes!.

Smart Ways to Save More on Ways Pay Less Taxes

• Check for student, military, or first order offers you may qualify for.
• Time non urgent purchases around major sale events for the deepest cuts.
• Leave items in your cart for a day; some stores send a follow up discount.
• Pair cashback with a coupon so you save twice on the same order.
• Stack a coupon code with an existing sale whenever the store allows it.

Final Thoughts

Before you check out, line up ways pay less taxes against current promotions and any codes you can stack. Small habits like these add up to real savings over a year.

Originally published at biblemoneymatters.com.