No matter whether you are served a tax return for the first time or been doing it for years, you can always learn how to prepare them and significantly save money. There are many strategies or loopholes that you can use to save on taxes, but many taxpayers don’t use them. Writes about this Grow.
Various methods of saving money that experts recommend, such as contributions to a health savings account (HSA) or 401(k), can help you save some money when paying taxes.
According to a survey by Nerd Wallet 2019, which was attended by more than 2,000 American adults, many do not know that some policies are in fact legitimate.
Four legal and recommended ways to save on taxes this season.
1. To contribute to IRA for 2019
According to the survey of 2019, many Americans think illegal to make IRA contributions for any calendar year after graduation.
“Surprise: this step is perfectly legal and quite clever,” says Richard Stumpf, certified financial planner at Financial Benefits Inc.
According to him, you have a deadline until April to Deposit money in an IRA account for the previous tax year. This means that you must contribute for 2019 to April 15, 2020 in the range of $6000. Just don’t forget to tell your financial institution that you want the money accounted for 2019, not 2020.
2. To make a contribution to the HSA for the year 2019
If your employer offers a spending account health (HSA), there is a loophole similar to the one that exists for the IRA. Until the deadline of paying taxes this year you can make a Deposit, which will be reckoned on last year.
An HSA is a tax account that you can use to pay for medical expenses. They have a triple tax advantage: contributions to an HSA are either predalagaem or tax-free, withdrawals are not taxed if you use them for qualified medical expenses.
“This is one of the best tax loopholes, and you can save a fair amount,” said Stumpf.
In 2020, HSA owners can save up to $3 $ 550 per person and $7 of $ 100 per family. If you make a contribution for tax year 2019, these limits are respectively $3500 and $7000.
3. Check if you are eligible for tax deductions on the earned income (EITC)
According to the IRS (IRS), about 1 in 5 taxpayers eligible for tax deductions for earned income, never claims them.
EITC is a deduction that reduce your tax bill. If you have $3000, but they are entitled to deductions of $1,000, your tax liability will drop to $2000.
If you earned less than $56 000 you are eligible for a tax deduction on earned income. It is a benefit to working people with incomes from low to moderate and can be up to $6 557.
Under the category of people who are eligible for the payments come from the taxpayers, US citizens aged 25 to 65 years or who have children that meet certain requirements. These requirements can be found here.
In addition, to be eligible for this deduction you must also obtain income from employment. You can obtain investment income, but only if the total amount thereon does not exceed $ 3,500.
4. Make contributions to your retirement account 401(K)
401 (k) is a retirement plan provided by employer, which allows employees of the company eligible to save and invest in their retirement with the tax deferred. And if you are looking to use tax incentives in the coming year, consider a contribution to a 401(k). Every dollar that you invest reduces your taxable income and can save you money next year.
Many Americans will depend on the savings accumulated in 401(k) plan or in another account for retirement, so it is important to start saving as early as possible.
Your 401 (k) also is a sure way to reduce your taxable income, so the more you invest, the more you save when it comes tax season. For 2020 the maximum limit is $19 500.