Monday March 3, 2014
Dear Clients and Friends,
Here are some easy tips you can follow to ease your pockets from heavy tax.
Retirement plans can give you a big boost.
Maximizing your retirement plans, such as your 401(k) and Individual Retirement Accounts or IRA can reduce your taxable income. Your contributions to a 401 (k) may reach up to $17,500 or $23,000 for ages 50 and above, while in a regular IRA its $5,500 or $6,500 for ages 50 and above. 401 (k) plans are on a pretax basis, which directly reduce your taxable income while IRA contributions become tax-deductible unless you participate in a separate employer-sponsored retirement plan.
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Hit two birds with one stone.
As mentioned earlier, 401 (k) plans are in pretax basis or a tax-deferred savings; with this in mind you can even maximize its benefits by sizing it up in the right amount. Let's say you can contribute up to $10,000, do not put it all under 401 (k) instead set aside a small portion or as savings, in this way you'll reap two fruits with one seed; lesser taxable income plus a bundle of savings. Just make sure you put it in a bank that gives interests.
The devil is in the detail.
Keep all receipts you get, or better yet scan them for permanents copies in case the receipts blur in time. These small things can give you big deductions in your tax. Just make sure to take in mind the receipts the next time you had your meal during business meetings, mileage when you drive, plus toll tickets and more.
Charity is the best policy.
Another two hits with one stone is contributing to charitable organizations. This contribution may give you tax deductions. Though you have to make sure that the organization you're giving is a qualified one or also known as 501(c)(3) organizations otherwise you will lose the tax deduction benefit. If it is a 501(c)(3) organizations then you are not only helping people, but you are also saving dollars for yourself.
Health is wealth.
Health Savings Account or HSA contributions are tax deductible, similar to the IRA, but the growth of the funds are non-taxable. So if you have an HSA and it is in your capacity to make the maximum contribution do it so, HSA fund growth will never be taxed as these funds will be used for medical expenses.
Look for freebies.
There are tax-free investments around the block, such as the municipal bond. Municipal bonds are basically you give loans to the municipal government. Some states gives free federal and state tax for municipal bond income and appreciation.
If you need help with your taxes and savings this year, ask for professional advice. It's always best to do it right the first time.