Biden is canceling up to $10K in student loans and all federal loans are paused until 12/31
Disclaimer: This post is not tax advice. The content of this post is designed to be educational in nature and does not constitute any legal, financial or tax advice. Please consult your tax professional for individual guidance.
Looking for ways to save money on taxes? You’re certainly not alone. Tax avoidance is a common goal, though tax evasion is illegal. It is perfectly legal to try to find ways to lower you taxes, but you may be breaking the law if you outright refuse to pay what you owe. It may be beneficial to work with a professional to find ways to lower your taxes, or maybe you are just looking for a few hacks. Here are a few ways to save a little this year.
It may be too late to contribute to your 401(k) for 2021, but did you know that you have until the tax filing deadline in April to contribute to your IRA or HSA (Health Savings Account)? This means if you find yourself owing taxes, you may be able to contribute to an IRA or HSA and potentially reduce your taxable income.
As a quick reminder, putting money into a Traditional IRA is a before-tax contribution. This means that if you qualify, money you place into a Traditional IRA directly reduces your taxable income. Roth IRA’s on the other hand are after-tax contributions. This means that contributions to a Roth IRA don’t reduce your taxable income.
In order to contribute to an HSA, you must have a high deductible health plan. If you qualify to contribute to an HSA- these accounts have what is known as a triple tax advantage. What this means is your contributions to an HSA reduce your current taxable income, the account grows on tax deferred basis and if you use the money for qualified medical expenses- the withdrawals are tax free.
Pro tip: If you are married and file jointly, check to see how much your partner has contributed to their accounts. Even if they don’t have income, they can contribute to an IRA (known as a spousal IRA) based on your earnings.
Do you have children? Are you in school, or even running a business? There are dozens of tax credits and deductions based on children, education and self- employment. Take the time to research these savings and check to see what you qualify for. Have you paid student loan interest? You may be able to deduct it. Have you taken classes for continuing education or started a business? Make sure you are getting all of the deductions that you qualify for.
Pro-tip: Check for credits based around what you have already done. For example, if you contributed to your retirement accounts- you may be eligible for the Saver’s Credit.
Generally speaking, when we make donations to organizations we do so out of the goodness of our hearts. It turns out doing these good deeds can also provide a benefit come tax time. If you donated to an organization this year- it makes sense to do a little research and see if you can write off that donation.
These are just a few of the ways that you can save money on taxes. If you want to get ahead for 2022 and learn some tax savings strategies, join us for an informative webinar. Register here.
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Anna Paul, CFP® is an Investment Adviser and Certified Financial Planner. She currently serves as money coach for Snowball Wealth providing personalized financial guidance in areas such as budgeting, building and maintaining credit, estate planning, debt management, and money mindset. Most importantly, she believes in coaching clients to adapt their mindset to their goals. She specializes in helping individuals identify financial goals and take actionable steps towards achieving them. Anna volunteers with Carolina Youth Coalition as a mentor and serves on the Volunteer Income Tax Association. When she isn’t giving financial education presentations, she can be found hiking, couponing, or trying new recipes.