01/03/2019
Are you paying too much in ? Are you getting all the credits and you are entitled to? Here are 7 tips to help you minimize and keep more in your pocket:
1. Participate in retirement plan. Every dollar you contribute will reduce your taxable income and thus your income taxes. Similarly, enroll in your company’s flexible spending account. You can set aside money for medical expenses and day care expenses. This money is “use it or lose it” so make sure you estimate well!
2. Make sure you pay in enough taxes to avoid penalties. Uncle Sam charges interest and penalties if you don’t pay in at least 90% of your current year taxes or 100% of last year’s tax liability.
3. Buy a house. The mortgage and taxes are deductible, and may allow you to itemize other deductions such as property taxes and .
4. Keep your house for at least two years. One of the best tax breaks available today is the home sale exclusion, which allows you to exclude up to $250,000 ($500,000 for joint filers) of profit on the sale of your home from your income. However, you must have owned and lived in your home for at least two years to qualify for the exclusion.
5. Time your . If your income is higher than expected, sell some of your losers to reduce taxable . If you will be selling a mutual fund, sell before the year-end distributions to avoid taxes on the upcoming dividend or . Also, you should allocate tax efficient to your taxable accounts and non-efficient investments to your accounts, to reduce the tax you pay on interest, dividends and capital gains.
6. If you’re retired, plan your retirement plan distributions carefully. Also, pay attention to the 59-½ age limit. Withdrawals taken before this age can result in penalties in addition to income taxes.
7. Bunch your expenses.
The most important thing is to be aware of the tax and that apply to you and to plan for events. And don’t be afraid to ask for help.