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Nov 8, 2019

Tips to Help you Cut your Tax Bill

If you receive an unexpected tax bill it can potentially bring on a lot of stress. There are a few things you can do to cut your bill legally. However, you might need to put a bit of effort in but it could be worth it.
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Adjust your W-4
This is the form that you need to hand to your employer. This form tells them how much tax they need to withhold from each pay check.  If you have a big tax bill looming, you might be able to raise the withholding until the next tax year.  If you received a large refund, you could reduce the withholding. This will mean you’re less likely to be living on less money.

Fund an FSA
Did you know that when it comes to your personal taxes you can add tax-free dollars to your FSA every single year? If your employer offers you a flexible account you could use it to your advantage. The latest limit is $2,700 and some employers might allow you to carry around $500 over to the next tax year.

Save Money for College
If you would like to save money so your child can go to college, you could potentially reduce your tax bill. Consider making contributions to your 529 plan. You won’t be able to deduct the contributions on the federal income taxes. However, you could deduct them on your state return. This is only the case if you are putting money into your state’s plan.

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Record Your Medical Expenses

If you have had dental care or expensive medical treatments, you should keep hold of your receipts. You can deduct any expenses that are 10% or more than the adjusted gross income for that year.  Let’s imagine that your income is $50,000. You would be able to deduct anything beyond the first $500.

Work on Your Timing
There can be a huge difference between doing your taxes on the last day of December and the first day of January. If you think you have an expense looming try to pay it this year rather than the next. So, for example, having that tooth extracted now means you could meet the medical expenses threshold. If you were to wait until next year you could lose out on your deductions.

Donate Your Money
When you donate money to charity those contributions are often times deductible. What’s more, is those donations do not always have to be in cash. If you have donated household items, food, or clothing you could have a lower tax bill. However, you will need to make sure that you got a receipt for your donations and they went to a recognized charity.

It is possible for you to reduce your tax bill, you just have to take some extra steps. By implementing those things, it can lead to you paying less in taxes every year. Follow the above tips and you’re less likely to get an alarming tax bill.

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