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Tax season can be a stressful time of year, especially for those who anticipate owing the IRS money. Generally, the higher your taxable income, the more taxes you pay. While it’s illegal to conceal any income you’ve earned to lower your tax bill, a CPA can advise you on several ways to legally reduce your taxable income, including the following.

How to Lower Your Taxable Income

1. Contribute to a Retirement Account

The federal government encourages taxpayers to save for their golden years by allowing tax-deferred contributions to specific retirement programs. Thus, setting money aside for the future can help significantly decrease how much you pay on your taxes now. Contributions to an employer-sponsored 401(k) or traditional IRA account are made with pre-tax income, which will lower your taxable income on a dollar-for-dollar basis up to the limits imposed for that year. IRA accounts can also be funded any time before the tax deadline, up to a maximum of $6,000 for 2019, or $7,000 for people 50 and older.

2. Maximize Deductions

CPATax deductions are expenses incurred during the year that can be used to reduce the amount of income that’s subject to tax. When filing your tax return, you must choose to either take the standard deduction or itemize all of your deductible expenses, including mortgage interest, property taxes, medical bills, qualifying educational costs, and business expenses. Rather than simply selecting the same method year after year, have your CPA run the numbers for each option to see which will reduce your taxable income the most.

3. Donate to Charity

Charitable donations can also help decrease your tax obligations if you decide to itemize your deductions. Under the current tax code, the IRS allows you to deduct up to 60% of your adjusted gross income for contributions made to qualified charities. Both cash and property donations are acceptable, but be prepared to provide your CPA with proof of the contribution when completing your tax return.

 

If you want to avoid paying the IRS more than necessary, turn to Tostrud & Temp S C. For more than three decades, this firm has provided residents throughout La Crosse County, WI, with reliable financial planning and tax services. Offering more than 120 years of combined experience, their CPAs are qualified to evaluate your unique situation and determine which tax-saving methods will give you the best results. Call (608) 784-8060 to schedule an appointment, or visit their website for more information on how they can help you get through tax season smoothly.

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