24 Best Ways to Save on Taxes & Keep More of Your Money
Tax season can be stressful, but with the right strategies, you can reduce your tax burden and keep more of your hard-earned money. Whether you’re an employee, a business owner, or an investor, there are plenty of legal ways to maximize deductions, claim credits, and take advantage of tax-efficient accounts.
By planning ahead and making informed financial decisions, you can minimize what you owe and even increase your potential refunds. Explore the best ways to save on taxes, thus helping you navigate the complex tax system with confidence.
Max out contributions to tax-advantaged retirement accounts
Putting money into a 401(k), IRA, or HSA can lower taxable income now while helping save for the future. These accounts grow tax-free, and in some cases, withdrawals in retirement are also tax-free.
Contributing as much as possible means paying less in taxes this year while building long-term financial security. Many employers also match 401(k) contributions, which is free money. Even a little extra each year can add up to big savings over time.
To learn more: How to Max Out Your Retirement Accounts
Claim all eligible tax credits
Tax credits reduce taxes dollar for dollar, which can mean a bigger refund or a smaller tax bill.
- The Earned Income Tax Credit helps low-to-moderate-income workers, while the Child Tax Credit supports families with kids.
- Education credits like the American Opportunity and Lifetime Learning Credits can lower costs for tuition and school expenses.
Many people miss out on credits simply because they don’t know they qualify. Checking eligibility before filing can keep more money in your pocket.
To learn more: Can I Claim My Girlfriend / Boyfriend as a Dependent? Overview, Rules, and Tax Guide
Deduct student loan interest if applicable
If student loans are part of your budget, you may be able to deduct up to $2,500 in interest paid each year. This deduction lowers taxable income, which can mean a lower tax bill.
Unlike some deductions, this one is available even if standard deductions are used. It’s a simple way to get some tax relief while paying down loans. Be sure to check eligibility since income limits apply.
To learn more: 14 Smart Tactics for Paying Taxes as a College Kid
Take advantage of Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA)
HSAs and FSAs allow money to be set aside for medical expenses without being taxed. HSAs roll over year to year, while FSAs usually require spending by year-end. Using pre-tax dollars for healthcare costs reduces taxable income, leading to tax savings.
Many employers offer these accounts, and contributions can also grow tax-free. This is a smart way to handle medical expenses while lowering taxes.
To learn more: What do I do if I can’t afford healthcare or insurance?
Deduct mortgage interest and property taxes if you own a home
Homeowners can deduct mortgage interest and property taxes, reducing taxable income and possibly lowering tax bills. This benefit can add up, especially in the early years of a mortgage when interest payments are highest. However, this amount must be higher than the standard deduction in order to itemize.
Property taxes can also be deducted, offering another way to save. Keeping track of these expenses helps maximize deductions. For many, owning a home comes with tax perks that renters don’t get.
To learn more: Am I bad with money if I don’t understand taxes or budgeting?
Write off business expenses if you’re self-employed or have a side gig
Running a business or side hustle means being able to deduct expenses like supplies, home office costs, and even internet bills. These deductions lower taxable income, meaning less money goes to taxes. Travel, meals, and equipment may also qualify.
Keeping good records makes filing easier and ensures all possible deductions are claimed. Self-employed people can save a lot if they track expenses properly.
To learn more: The Best Side Hustle Ideas to Grow Your Money
Contribute to a 529 plan for education savings with potential state tax benefits
A 529 plan helps families save for education while getting tax breaks. Some states offer deductions or credits for contributions, lowering state taxes. The money grows tax-free and can be used for tuition, books, and other school costs.
Unlike some savings accounts, withdrawals for education expenses aren’t taxed. This makes it a smart way to plan for future education costs while reducing tax liability.
To learn more: How to Pay for College Without Loans and Student Debt
Claim home office deductions if you work from home and qualify
Those who work from home may be able to deduct part of their rent, mortgage, or utilities. This can lower taxable income, reducing the amount owed. To qualify, the space must be used regularly and exclusively for work.
Even freelancers and gig workers can take this deduction if they meet the rules. Tracking expenses carefully ensures no savings are missed.
To learn more: 10 Smart Ways to Spend Tax Return & Not Blow It
Track and deduct eligible charitable donations
Donating to qualified charities can lower taxable income and reduce taxes owed. Cash donations, goods, and even travel costs for volunteer work may qualify. However, you must have itemized deductions higher than the standard deduction.
Keeping receipts and records is important for claiming the deduction. Some donations may need an appraisal, like valuable items. Giving to charity not only helps others but also provides tax benefits.
To learn more: 7 Humorous Ways on How NOT to Spend Tax Refund (Yet they happen)
Use tax-loss harvesting to offset capital gains
Selling investments at a loss can offset gains and lower the taxes owed on profits. This strategy works well for those with stocks, bonds, or other investments. Losses can also offset up to $3,000 of regular income per year.
Any unused losses roll over to future tax years, providing long-term benefits. Keeping an eye on investment performance can help take advantage of this tax break.
To learn more: 10 U.S. States That Won’t Tax your Retirement to Death
Deduct medical expenses exceeding the IRS threshold
If medical bills add up to more than a certain percentage of income, they may be deductible. This includes doctor visits, prescriptions, and even travel for medical care. The threshold changes yearly, so checking IRS guidelines is key.
Keeping track of all medical costs throughout the year ensures nothing is missed. This deduction can offer relief for those facing high healthcare expenses.
Consider bundling deductions into one tax year for bigger write-offs
If deductions are close to the standard deduction limit, bunching them into one year may provide a bigger tax break. This works well for charitable donations, medical expenses, or property taxes.
By timing payments strategically, taxable income can be reduced in high-tax years. Planning ahead makes it easier to get the most out of itemized deductions. This approach helps take full advantage of tax rules.
Take advantage of employer benefits
Some employers offer tax-free benefits like commuter assistance or dependent care FSAs. These allow pre-tax dollars to cover costs, reducing taxable income.
Commuter benefits can include parking, public transit, or rideshares. Dependent care FSAs help pay for childcare while lowering tax bills. Checking what’s available at work can lead to extra savings.
To learn more: Paying Too Much in Taxes? Check these common mistakes
Claim the Saver’s Credit for low- to moderate-income retirement contributions
Those who contribute to retirement accounts and meet income limits may qualify for the Saver’s Credit. This credit reduces taxes owed and encourages saving for the future. It applies to 401(k), IRA, and similar plans.
Many people miss out because they don’t know about it. Checking eligibility could mean extra tax savings while preparing for retirement.
To learn more: 14 Must Know Secrets to Save in Retirement Accounts
Keep records of job search expenses
Some job search costs, like resume printing and travel for interviews, may be deductible. This applies to searches within the same industry, not career changes.
Keeping detailed records helps claim the deduction. While small, these expenses can add up and reduce taxable income. Every deduction counts during tax season.
To learn more: How to Organize Personal Finances in 8 Simple Steps
Deduct moving expenses if relocating for military service
Active-duty military members who move due to orders can deduct certain moving costs. This includes travel, storage, and transportation expenses. Unlike most taxpayers, service members don’t have to meet distance or job-length requirements.
Keeping receipts and records ensures all eligible costs are deducted. This deduction helps reduce taxable income and ease the financial burden of relocation.
Use the Lifetime Learning Credit for continuing education costs
The Lifetime Learning Credit helps cover tuition and education expenses, even for part-time students. It offers up to $2,000 per year and applies to college, trade school, and professional courses. Unlike some credits, it can be used beyond four years of college.
This makes it useful for career changes or skill-building at any age. Checking eligibility can lead to valuable tax savings.
To learn more: 8 Simple Benefits of Continuing Education
Adjust your W-4 withholding to avoid overpaying taxes
Having too much withheld from paychecks means giving the IRS an interest-free loan. Adjusting W-4 settings ensures more take-home pay throughout the year. This helps avoid big refunds or unexpected tax bills.
Reviewing withholdings regularly keeps finances on track. Making small changes can prevent surprises when filing.
To learn more: How to File Taxes Without W2: The Simple Guide
Claim energy-efficient home improvement tax credits
Installing energy-efficient upgrades like windows, doors, or solar panels may qualify for tax credits. This lowers the tax bill dollar for dollar. The IRS updates eligible improvements and limits yearly.
Saving on energy bills is another benefit. These credits make home upgrades more affordable while reducing taxes.
To learn more: How to Be Frugal Green: 91+ Tips to Save Money and Environment
Deduct investment-related expenses if applicable
Certain investment costs, like advisory fees and trading expenses, may be tax-deductible. These deductions help lower taxable income for those actively managing their portfolios. Some expenses, like margin interest, have specific rules for deductibility.
Keeping track of investment-related costs ensures no potential savings are missed. This is a useful way to reduce taxes while growing wealth.
Write off mileage and expenses if using your car for business
Self-employed workers and freelancers can deduct business-related car expenses. This includes mileage, gas, maintenance, and even depreciation. The IRS allows a standard mileage rate or actual expense method, whichever provides greater savings.
Keeping a mileage log is key to claiming this deduction properly. Using a car for business can lead to significant tax benefits.
Take advantage of rental property deductions if you own investment real estate
Rental property owners can deduct expenses like mortgage interest, property taxes, repairs, and insurance. Depreciation also lowers taxable income over time. Even travel to manage properties may qualify as a deduction.
Proper record-keeping helps maximize write-offs and lower tax bills. These deductions make real estate investing more profitable.
To learn more: Is Real Estate Investment Trusts A Good Career Path?
Consider structuring income to lower your taxable bracket
Adjusting income sources can help stay in a lower tax bracket and reduce overall taxes. This can include deferring bonuses, making pre-tax retirement contributions, or spreading income across years.
Lowering taxable income may also increase eligibility for credits and deductions. Careful planning helps avoid higher tax rates. This strategy works well for both individuals and business owners.
To learn more: Do You Have to File Taxes if You Have No Income?
Hire a tax professional to uncover additional deductions and credits
A tax expert can find deductions and credits that might be missed. They know the latest tax rules and help maximize refunds. While tax software works for simple returns, professionals can handle complex situations.
Their fee may be tax-deductible, adding another way to save. Getting expert help can mean paying less in taxes.
Time to File Your Taxes Online
Filing taxes online is one of the fastest and easiest ways to get through tax season. With the right tax software or IRS Free File, you can quickly enter your information, check for deductions, and submit your return without hassle.
E-filing also reduces errors and speeds up refunds, especially if choosing direct deposit. Keeping digital copies of tax documents ensures everything is organized for future reference.
Whether filing on your own or with professional help, online tax filing makes the process smoother and more efficient.
To learn more: How to File Taxes Online in One Afternoon
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