Time-tested strategies for tax-wise living
Invest a small amount of time to reduce your taxes. Educate yourself about the tax laws and incentives to dramatically and permanently reduce the taxes that you pay over your lifetime. Now, more than ever, with the recent major tax law changes, it pays to understand tax-reduction strategies.
Stay on top of your tax situation annually and get help as needed. Every year, you face “use it or lose it” opportunities to cut your income tax bill. Consider working with a tax advisor who can suggest strategies and help you stay on top of your situation. Regardless, spend some time understanding the tax laws and strategies to help you make optimal decisions.
Use retirement accounts as a simple but powerful way to reduce your income taxes. The newer tax laws dramatically increased the amount you can contribute to these accounts. Lower-income earners also can get free government matching money from contributions.
Get, and stay, organized. Try keeping your tax and financial documents organized year-round. This practice saves many hours not only when you prepare your tax return but also when you make important financial decisions.
Learn from your return. After you’ve gone to all the time and trouble of preparing your annual income tax return, don’t let that effort go to waste. Use the information to identify areas for better financial management in the coming year.
The more you consume, the more you pay in taxes. As you earn and spend your income, you not only must pay income tax on your earnings, but you also incur sales tax and other taxes on your purchases. Moreover, many of the best tax breaks available for people at all income levels are accessible only if you’re able to save money to invest.
Invest tax-wisely. Understanding the tax implications and ramifications when investing your money. Remember, it isn’t what you make, it’s what you get to keep that matters. Tax friendly mutual funds and exchange-traded funds enable you to keep far more of your returns.
Starting and running your own small business yields many tax breaks. Be sure you understand the rules so you can legally and permanently reduce your income tax bill and stay out of trouble should you get audited!
Don’t buy real estate only for tax purposes. Owning your own home and other real estate can be an investment that helps reduce your taxes. But don’t purchase real estate just because of the tax benefits — these benefits are already reflected in the price that you pay for a property. Investment real estate tax rules are numerous and sometimes complicated so take the time to learn about them and get help as needed.
Know when estate planning matters. Use the tax laws to your advantage so that your heirs and others get more of your money. Read up on this issue so that you know when and what you need to do to arrange your financial affairs.
Keep taxes in perspective. Life has so much more to offer than just working and making money. If you do such a good job reducing your taxes that you gain great wealth, be sure to enjoy it and share it with those you care about.
Don’t have the book yet? Explore Reducing Your Taxes For Dummies for more great tips on reducing your taxes.