Taxes are complicated. Everyone knows the tax codes run to thousands of pages, and even attorneys who specialize in taxes don’t know all the ins and outs.
But that doesn’t mean you can’t manage your taxes effectively. Indeed, many of the tactics you can use to do this are remarkably simple, and when you combine them they can save you a lot of money.
Start with tax refunds, which are considered one of the few feel-good aspects of paying taxes. But this is an illusion—a refund means you’re having too much tax withheld, and if you fill out a W-4 form for your employer you can arrange to have more at the end of your pay period by having less money withheld.
Retirement accounts are another important aspect of managing your taxes. Simply put, if you don’t have one, you’re costing yourself money. Even something as basic as a 401(k) account can lower your tax bill, and other kinds of retirement accounts can help lower it even more.
Investments can be another great way to manage your taxes. Most people think investing is too complicated, but tax-free bonds are one example of an easy purchase that can save you money. This will diminish your tax bill, and you’ll love the extra income that low-risk investments bring in.
Tax credits represent yet another way to lower your taxes. The IRS offers earned income credit for those in lower tax brackets, and there are a variety of other so-called “saver’s credits” for taxpayers who contribute to a retirement plan.
If you own a home, deducting the interest you pay on your mortgage is a time-honored way to manage your taxes. A similar deduction is available if you have high medical expenses, although you’ll have to itemize to get this deduction.
These are just a few of the ways you can manage your taxes and lower your tax bill. There are much more available, so it’s worth studying up on them and consulting a tax attorney to figure out which ones are best for you.
The money you’ll save will go a long way toward making the time you invest worthwhile, and when you have more in your wallet at the end of the day you’ll be glad you did!