Reducing your taxable income can have a major impact on your total tax bill. And according to Tostrud & Temp, S.C., an accounting firm in La Crosse, WI, proper planning shaves thousands of dollars off the top, potentially dropping you into a lower tax bracket. Below, their accountant outlines a few tried-and-true reduction strategies.
Accountant Discusses How to Minimize Your Taxable Income
Charitable contributions are a win-win. Not only will you reduce your taxable income, but you will also promote positive change in the world. When deductions are itemized, the IRS allows for contributions of up to 50% of your adjusted gross income, allowing you to make sizable donations while lowering your tax liability.
Funds contributed to an employer-sponsored retirement plan, such as a 401(k) account, are not taxed by the IRS. If your employer does not offer a 401(k), an individual retirement account will also do the trick.
If you have upcoming medical expenses, such as surgeries, dental procedures, or prescription medications, opening a health savings account or flexible spending account can effectively lower your taxable income. A quick call to your accountant will determine which option is right for you.
The interest you pay toward debts may be tax deductible. Provided you itemize, these deductions may apply to interest paid on your mortgage, student loans, purchase investments, and business debt.
Defer Income Until January
If you are anticipating a sizable holiday or year-end bonus, request that your employer pay it out after the first of the year. Likewise, if you are self-employed, invoice your clients later in the month to avoid receiving payments that increase your taxable income.
Looking to minimize your tax liability? Contact the La Crosse County financial accounting professionals at Tostrud & Temp, S.C. Backed by over 35 years of industry experience, the team provides the accounting services and solutions you need to maximize your deductions and reduce your tax footprint. Learn more about their financial services online, and call (608) 784-8060 to speak with an accountant directly.