If you’re expecting to owe the IRS this year, you might be dreading the tax return preparation process. However, it is possible to lower the amount of income that the IRS can tax, which would reduce your overall bill. If you’re interested in this strategy, use the three tips below.

3 Tips for Lowering Your Taxable Income

1. Make a Donation

If you have some extra money in your checking account, use it to make a donation to a charity of your choice. Whether you choose a world hunger-focused organization or a local non-profit, you can take pride in the fact that your funds are being put to good use. Plus, any contributions you make to charity won’t be considered part of your taxable income. You can even make a donation on your credit card to do this, even if you don’t pay it off by December 31st.

2. Postpone Your Bonus

Many employers reward their teams with a bonus at the end of the year. However, this extra sum will lead to a quick rise in your taxable income. If you already owe a considerable amount of income tax for the current year, ask your employer to wait until January to distribute the funds. This way, you can claim it on next year’s tax return instead. You can also use this strategy if you’re expecting holiday bonuses from clients.

3. Put Money in Your Retirement Plan

Yet another way to lower your taxable income is to give money to your future self. If you have a 401(k) or another retirement plan backed by your employer, you can take some of the money you earned this year and deposit it into the account. Once you turn 50, you can contribute up to $24,000 to your plan per year.

On the other hand, avoid taking any money out of your retirement plan if you are under 59 and a half. Otherwise, the money will be added to the year’s taxable income and a 10% penalty tax will be placed on top.

If you need more help with the tax return preparation process, reach out to Burch & Associates of Lincoln, NE. They staff a team of Enrolled Agents to help you work through the details of your return. They can also offer advice on how to reduce your bill and maximize your deductions. To learn more about their offerings, visit the website. Call (402) 483-4791 to schedule a free consultation for tax return preparation.