Every year millions of Americans scratch their heads to figure how to make the most out of their earnings and lower their tax bill. Here, we would guide you through some of the best ways.
New Year brings with it, new changes in regulations and new opportunities to save. With new income tax regulations, married couples who file jointly with a gross income above $250,000 can immensely benefit. Moreover, a new 0.9% tax on wages above that amount, plus 3.8% on investment income are other benefits. Let’s browse through some schemes which CNNMoney has explored.
A Retirement Plan
A very fore-sighted deduction you can use to reduce your tax amount is by contributing to your retirement account. But, there’s still a limitation here. This deduction will only be applicable if you are an active participant to Traditional IRA’s up to $5,500, or $6,500 if you are more than 50 years old. Even if your spouse is an active participant, you can be eligible for the benefit. The deduction is determined by your modified adjustment gross income (MAGI) and your tax filing status.
Donation to a Charitable Institution
Another noble way to exempt your taxes is to make donations to a registered charitable institution. Donations to individuals will not gain you tax benefits. Regarding this, you should keep in mind a few pointers. Firstly, you must have a receipt or a dated bank record for all cash contributions. Moreover, only the actual amount that has been donated will be liable for deduction. Any promises for the future amount will not be considered and thus, you need to plan wisely. Any amount payable by your credit card will enable you to reduce tax.
Investment Tax Evasion
If you expect to gain income from unearned sources like interest, dividend or a larger sum of cash from properly/ vehicle sale, you would be liable for 3.8% investment tax. Our advice would be to spread the earning to the coming year. At last, the key to saving your bugs is to keep yourself updated with new regulations, new schemes and keep your records updated.