Steps to Reducing Your Taxable Income

Whether or not it is tax season, planning for taxes is a year round consideration. Through prudence, you can reduce your taxable income by applying the following rules and by claiming these adjustments that are given to you. Let’s take a look.

Step 1 Deduct moving expenses

Did you move in the last year? Was the move greater than fifty miles from your primary residence? If so, then you can the expenses on your Form 1040. Keep receipts to ensure you can prove your claim.

Step 2 Set aside money into a nontraditional IRA

Have you been saving for retirement? If so, consider putting aside some of these monies into a nontraditional IRA account, which is available at virtually all financial institutions. Although mutual funds, stock funds, bonds, and other investment vehicles have higher interest rates, you still pay taxes on these financial instruments on an annual basis. This erodes into your actual retirement.

Step 3 Use tuition

You are given the American Opportunity Lifetime learning credit or Take Credit where Credit is due, but you can not deduct both. Tax software usually optimizes the full amount of any tuition and fees paid in a given year so that you get the most deduction.

Step 4 Consider Your Health Savings Account

Did you know you can deduct $3,000 if you are single or $5,950 if you have a family? Yes, there is an existing tax break that allows for these deductions.

Step 5 Employed by yourself

There are many deductions you can take if you are self-employed? You can deduct half of your employment health insurance costs, taxes, any retirement contributions to Sep (simplified employee pension) or any individual 401(k) plans.

Step 6 Pay for a student loan?

If you are paying off a student loan, you can deduct up to $2,500 each year.

Remember, max your taxes to your benefit.