Tips for Reducing Your Taxable Income
Your taxable income is what’s left over after deducting allowable exclusions from your gross income. There are many ways to lower this figure to pay less taxes, so here are some suggestions that may help:
- Use your 401(k).
- You won’t pay tax on the money you contribute to your 401(k) from your paycheck. Its advisable to maximize your annual contribution to for reasons: reduce your gross income & benefit your retirement savings.
- Deduct any qualified medical expenses you have. Normally, you can deduct qualified medical expenses that exceed 7.5% of your adjusted gross income. Maintaining accurate records is important.
- Make charitable donations––they’re tax-deductible. Even if you donate property like clothes or furniture, you can claim deductions if you keep the receipts.
- Funding your FSA (flexible spending account) from your paycheck will help reduce your taxable income.
- Contribute to a traditional IRA. With a traditional IRA, you don’t pay taxes on contributions until you withdraw the amount later.
- Deduct home office expenses – including phone, internet, square footage of your home, utilities, etc.
A financial advisor can help you devise a strategy for reducing your taxable income.