Ways to Reduce your Tax Bill

Posted on May 5, 2023

Ways to Reduce your Tax Bill

When planning your taxes for this year, you can manage your savings and expenditures in such a way that you pay less in taxes. You can reduce your tax bill considerably by using credits and deductions smartly and by making investments where they provide you the maximum benefits. CNN Money shares some valuable tips on how you can reduce your tax bill in 2014:

Shelter income

“One of the few things you can still do to cut your 2013 tax bill is to top off a traditional IRA.

“If you don’t have a retirement plan at your job, you can deduct your full contribution, up to $5,500, or $6,500 if you’re 50 or older. Assuming you have a workplace plan, you’re entitled to a full or partial deduction only if you earned less than $115,000 as a married couple filing jointly, $69,000 as a single filer.

“But the growing popularity of another tax-favored plan opens up a second possibility. With a high-deductible health insurance plan, you can fund a health savings account and deduct your contribution no matter how high your income is.”

“Deduct home office expenses

“Until this year, to grab this write-off you had to break out a measuring tape and a calculator and dig up a year’s worth of bills.

“This year you have a choice: You can instead simply deduct $5 per square foot of office space. Unless the old method would net you more, take the shortcut (the simplified deduction is capped at $1,500). ‘The new option is great for people who didn’t want the headache of figuring out the home office deduction,’ says Herman.”

“Cluster medical costs

“Until last year you could deduct medical expenses that exceeded 7.5% of your AGI. That hurdle has been raised to 10% if you are under 65. Those 65 and older can keep using 7.5%, but only until 2017.

“What to do: If you’re near the cutoff, take a second pass through your receipts.

“‘Don’t forget dental care and travel costs for your doctor and dentist visits,’ says Staten Island CPA John Vento. Other expenses you might overlook: doctor-prescribed weight-loss programs, laser vision surgery, and health-related home upgrades, such as safety bars in the shower (see IRS Publication 502 for a full list).

“Despite recently liberalized laws, though, medical marijuana is not deductible.

“Longer term, try scheduling elective medical procedures so that you bunch as many expenses in a single year as possible.”

It is good to know which deductions you will be claiming for 2014 so that you can ask for and keep the receipts and documents of the expenditure safely. You may use the help of a tax professional not only to determine which credits and deductions you can claim, but also to choose your tax filing status (filing separately, filing jointly, head of household) and method of filing (the standard deduction or itemized deductions) that will give you the most benefits.