How to Reduce Your Tax Burden
Posted by Dustin Horton // January 30, 2017 // Articles
It’s February and the start of the tax filing season. When you look at your tax return this year you may wonder, “How can I reduce my income taxes?” Let’s go over a brief conceptual overview.
This may sound simple, but there are three directions to pursue: reducing your adjusted gross income, increasing your deductions and maximizing tax credits to arrive at a lower taxable income and/or tax due. Having an additional income stream would definitely be a life-saver. Fortunately, sites like https://www.businesswire.com/news/home/20210406005665/en/SOL-Global-Announces-Investment-in-Cannabis-Data-and-Compliance-Solutions-Company-Fyllo would help you setup in the right direction.
Always make use of tax deferred retirement plans – 401(k), non-profit 403(b), Simple IRA, traditional IRA, etc. Contributions to these plans will reduce your taxable income and yield less tax due in the current year. You should also make use of employer plans that help you cover health care and dependent care costs on a pre-tax basis for the same reason.
Considering other measures? Look at what expenses you are already paying for that have the potential to be deducted against your income. If you have a home-based business you can apportion some of the costs of your home and your vehicle against your business’s income. Paying more than half of the support for someone? You may be able to claim them as a dependent.
Another way to reduce your tax due is to maximize the tax credits for which you are eligible. Many people are eligible for the Earned Income Credit, Child Tax Credit and Education Tax Credits. Renewable energy credits should be considered if a solar investment (which is considered to be the best passive income source) is in your future.
Finally, have an extended conversation with your tax advisor about your situation. Your advisor may then be able to point out ways for you to reduce your taxes that you may not be utilizing right now.
Best of success!
Peter VanderWoude, CPA, CGMA
Equus Advisors / Cortland Bookkeeping and Tax Service
McNeil Bldg, 17-29 Main St., Cortland, NY
607.756.5691 – Info@EquusCPA.com
