Q: How to Save on Taxes All Year Round?
1. Review your W-4 after you file your tax return or you have life change. If you got a big tax refund this year, it meant that you’re having too much tax taken out of your paycheck every payday. Filing a new W-4 form with your employer (talk to your payroll office) will insure that you get more of your money when you earn
2. Review your retirement savings plan. One of the best ways to lower your tax bill is to reduce your taxable income. You can contribute to up to $17,500 to your 401(k) or similar retirement savings plan in 2014 ($23,000 if you are 50 or older by the end of the year). Money contributed to the plan is not included in your taxable income
3. Additional funding an IRA. You can still deposit your IRA before 2014 income tax return due to deposit your 2014’s IRA. If you don’t have a retirement plan at work, or you want to augment your savings, you can stash money in an IRA. You can contribute up to $5,500 ($6,500 if you are 50 or older by the end of the year). Depending on your income and whether you participate in a retirement savings plan at work, you may be able to deduct some or all of your IRA contribution. Or, you can choose to forgo the upfront tax break and contribute to a Roth IRA that will allow you to take tax-free withdrawals in retirement.
4. Join Company’s Flexible plan: a) Health tax break. Be aggressive if your employer offers a medical reimbursement account — sometimes called a flex plan. These plans let you divert part of your salary to an account which you can then tap to pay medical bills. b) Pay child-care bills with pre-tax dollars. After taxes, it can easily take $7,500 or more of salary to pay $5,000 worth of child care expenses. But, if you use a child-care reimbursement account at work to pay those bills, you get to use pre-tax dollars. That can save you one-third or more of the cost, since you avoid both income and Social Security taxes.
5. Have your boss to pay you some fringe benefit: such as pay for you to improve yourself. Companies can offer employees up to $5,250 of educational assistance tax-free each year. That means the amount doesn’t show up as part of your salary on your W-2. The courses don’t even have to be job-related, and even graduate-level courses qualify.
6. Energy equipment –go green. A tax credit is available for homeowners who install alternative energy equipment. It equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, and wind turbines, including labor costs. There is no cap on this tax credit, which is available through 2016.
7. Doing good. Keep track of what you spend while doing charitable work, from what you spend on stamps for a fundraiser, to the cost of ingredients for casseroles you make for the homeless, to the number of miles you drive your car for charity (at 14 cents a mile). Add such costs with your cash contributions when figuring your charitable contribution deduction.