Four Ways to Save on Tax

If there’s one thing we don’t want when the year draws to a close, it’s a tricky tax bill. Fortunately, a little planning can go a long way in helping you save on the amount you owe the IRS. While there’s no guaranteed way to make sure that your tax bill won’t bite you, there are ways you can trim it substantially. Here are our tips.

Take Advantage of Tax-Deferred Savings

A great way to trim your taxes is by saving money in a tax-deferred retirement account. Not only are you getting a head start on your retirement goals, but you could also lower your taxable income enough to fall into a lower tax bracket. So if your employer offers a tax-deferred program like a 401(k), make sure that you are participating in it so that you don’t miss out on any match your employer provides.

Put Money Into an HSA

If you have health insurance at work, check to see if the plan offers an HSA—a tax-advantaged account that lets you set aside pre-tax income for medical expenses. A triple tax benefit is provided by an HSA: money contributed to an HSA escapes all taxes at all levels, the balance grows tax-deferred (and can be invested in mutual funds), and withdrawals used to pay medical expenses are tax-free.

Get Tax Credit for Charitable Work

Keep track of all the expenses you incur while doing charitable work. Include things like the cost of stamps for a fundraiser, the cost of ingredients for casseroles you make for the homeless, and the number of miles you drive your car for charity (at 14 cents a mile). Add such costs with any cash contributions you may have made during the year when figuring out your charitable contribution deduction.

Claim a Deduction for Your Home Office

If you happen to use a part of your home regularly and exclusively for business purposes, you may be able to get a tax break on some costs that would normally be considered personal expenses. These include part of your utility bills, insurance premiums, and home maintenance costs.