What many of us do not understand is that a little tax planning helps in saving more money for the upcoming days. Even though it is true that every person’s situation is not the same plus tax rules and laws can change any day, hence, it is always wise to consult a tax professional for your best financial interest.
Extend Contributions to Retirement Accounts
Either of the 401(k) or 403(b) contributions deducted from your paycheck on a pre-tax basis decreases your taxable income. Hence, if you make $50,000 as well as have $100 deducted from your 26 paychecks in 2020, which is $2,600. Therefore, your adjusted gross income (AGI) is $47,400. It can save around $312 in taxes for a married couple, conditional on your tax bracket. If you find it challenging to manage, then you can hire the services of an accountant to help with income tax in Fort Mcmurray.
Benefit from a Flexible Spending Account
It must be known that if FSA is obtainable from your employer, then every dollar you put in reliable care expenses or medical costs, it reduces your taxable income. Also, the money is obtained from your paycheck through a pre-tax basis. After that, you submit expenditures for reimbursement from your paycheck through a pre-tax basis.
Very few know that maximum you can set aside in the current year is $5,000 for dependent care as well as $2,750 for health care. In addition, if you have lots of qualified expenditures for both, it could decrease your taxable income by $7,500.
Contribute to a Health Savings Account
This is one more attached to your employee advantages at work. In case of a high deductible health plan (HDHP) is provided and you pick it for your medical treatment, you can contribute to an HSA to put something aside for cash-based medical costs not secured by your plan. There are loads of rules around HSAs, so visit the IRS site to find out more about it.
Invest in a New Home
If you want to buy a new home in this 2020, then there are good chances to reduce your taxable income by itemizing deductions for mortgage interest, plus a possible part of the property taxes. Moreover, because of the Tax Cuts and Jobs Act of 2018, you can go for the standard deduction for your tax documenting status as opposed to itemizing conclusions.
Home buying brings its benefits of money related and drawbacks outside of tax planning. Get the help of a tax consultant to check whether it includes any points of interest when building up your tax plan.