Tax mitigation is a legal practice used by tax professionals who thoroughly understand the Internal Revenue Code (IRC). Using their in-depth knowledge of loopholes in the IRC, tax experts can help clients and businesses mitigate the amount of tax they are legally required to pay, minimizing what is owed and saving clients money.
IRC loopholes allow taxpayers to reduce income taxes, capital gains taxes, and even some business income taxes. It’s crucial to tread carefully; tax mitigation is legal, but tax evasion (an effort to knowingly cheat the IRS out of monies owed) is not.
10 Ways To Save Money on Taxes
Individuals and businesses can use tax mitigation services to maximize the amount of money they save on taxes. However, there are also some general best practices that all Americans can employ to ensure they save every penny possible.
1. File on time.
Avoid fines by filing on time. If you miss the April 18 extension, you will be fined on an increasing scale.
2. Contribute to your health savings account (HSA).
HSA deductions are pre-tax, withdrawals for certain expenses aren’t taxed, and any growth is tax-free.
3. Increase retirement account contributions to reduce taxable income.
When contributing to IRA or 401(k) or 403(b), you use pre-tax dollars. You reduce your taxable income when you contribute to these funds.
4. Add to 529 college savings.
Contributions to a 529 college savings fund are made with after-tax dollars, but the earnings on the account are tax-deferred as long as they are in the 529. Additionally, the money you use from your account for certain educational expenses isn’t taxed.
5. Review mutual fund and stock performance.
Go over your investments with your financial planner. These tax professionals can help you offset capital gains and reduce your taxes through tax-loss harvesting.
6. Take all the tax credits and deductions you’re eligible for.
Explore home energy efficiency improvement credits, child tax credits, electric-powered vehicle credits, and home property credits. These can change yearly, so make sure you research what you may qualify for before filing.
7. Make charitable donations.
Keep an itemized list of donations you make during the year, and be sure to keep receipts or end-of-year statements the charity provides. Your itemized list will help when it comes time to deduct the value of your donations from your pre-tax income. For larger donations, consult a tax professional.
8. Pay your business expenses early.
Maximize your deductions by charging business expenses early. If you wait until the end of the year, your expenses will count for the previous year’s taxes, even if you don’t receive those goods and services until the following tax year.
9. Track office expenses.
Things like paper and toner are easy to buy from your personal account but resist overlooking these expenses during tax season. Keep a good record, and turn the information in to your personal financial planner to help maximize your mitigation opportunities.
10. Consult a Tax Professional
There are many ways to mitigate the amount of tax an individual or business is responsible for. Combining individual circumstances can also trigger or remove certain tax-reduction eligibility. The best way to ensure that your efforts at tax mitigation are legal, it’s important to consult with a financial planner.
At Miser Wealth Partners, LLC, we empower clients by skillfully and legally lowering their taxes with our tax mitigation services. Schedule an appointment today for more information about how our personal financial advisors and tax professionals can help you.