Tax Reduction 201: 4 Ways To Lower Your Tax Liability In 2017
In an 18th century letter, Benjamin Franklin is said to have written:...in the world nothing can be said to be certain, except death and taxes."
It's been a while since Mr.Franklin penned those words, but sure enough, people are still doing their yearly taxes in 2017 on pain of being taken to tax court.
That being said, what if there was a way to owe less in taxes every year?
How would having a few hundred or thousand extra dollars change your life in the coming year?
Believe it or not, you don't have to finance shell corporations or stash a bunch of assets in offshore to reduce your tax bill.
Here are 4 simple, legal methods you can use to increase your tax deductions and your savings for the fiscal year of 2017.
1.Put Money In an 401(k) or an IRA
For all the discussion of how much money goes into a 401(k) or a traditional non-Roth IRA ahead of retirement, people often forget that the contributions are made before tax.
What this means is that you have the option of taking the amount paid into either the IRA or the 401(k), or both, and subtracting it from your taxable income.
Although you will eventually be taxed on these funds when you reach retirement age, this is a move that will bring down your tax liability this year.
Short-term buying and selling of stocks and company shares is all the rage for people who are looking to make a quick and tidy profit off of it.
Where your taxes are concerned, however, holding your investment for at least 366 days can reduce your capital gains tax rate payment by more than 10% depending on your earnings.
Although it would be insane to change your trading style to reduce your tax liability, taking a longer position can certainly pay off.
3.Itemize Your Deductions
Nobody likes sitting down and writing a full list of everything that could potentially be relevant during tax season, but itemizing can go a long way towards helping you uncover deduction opportunities that you may have otherwise missed.
If you sold a house, bought a house, or have multiple streams of income, itemizing will feel tedious at points, but it'll be worth the savings in the end.
4.Have You Contributed To Your HSA?
Bringing to mind its retirement savings counterparts in the 401(k) and the IRA, an HSA is a convenient means of bringing down tax liability if you happen to possess a health insurance policy with high deductibles.
Not only are contributions considered deductible, money taken from the HSA for medical costs has the added benefit of being tax-free.
With limits that range depending on the number of individuals covered, this is a tax-saving move that can save you thousands.
When it comes to taxes, there's no question that the government will be getting its proverbial "pound of flesh".
However, just because you're expected to pay taxes, that doesn't mean that you have to pay up no questions asked.
By taking advantage of strategies like retirement saving contributions, HSAs, itemizing, and long-term investing, you can easily increase your deductions this year.
It simply doesn't get any easier than that.