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Tuesday, May 21, 2013 | 5:16 p.m.

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Smart ways to help reduce your taxes

 

 
  • Here are a bunch of helpful methods to assist you in reducing your taxable income. These are great tips to use throughout the year when opportunities arise. When planning large purchases or gifts, get into the habit of thinking about how your taxes may be impacted as well.
  • Save receipts for medical bills, prescriptions and co-pays if you are not using a health savings account. You can take a deduction that will lower your tax liability, if your medical expenses exceed more than 7.5% of your adjusted gross income (AGI).
  • You can make a maximum contribution of $16,500 dollars to your 401K account annually. Investing in retirement savings can lower your tax liability by giving you a tax credit.
  • Paying rent does not provide you with a tax benefit. Owning a home not only means you are building equity, it also lowers your tax liability because mortgage interest is a tax deduction if you meet the income requirements.
  • Deduction of state and local sales tax for certain new cars, light trucks, motorcycles and motor homes purchased after Feb. 16, 2009 and before Jan. 1, 2012 can lower your tax liability.
  • Tax free donations are a great way to help an organization or individual in need and lower your taxable income for the next income tax season.
  • Your home mortgage payment is likely the biggest monthly expense in your household. Use your income tax refund to make an extra payment, or two! Making one extra mortgage payment every year could reduce the lifetime of your loan by up to 5 years.
  • Real estate taxes are tax deductible. If your property tax bill is due early next year, you might want to pay it now and take the deduction.
  • By giving $13,000 or less per year per person you can avoid the gift tax. Gifts over that amount will reduce your lifetime gift tax exclusion, and gifts over the exclusion will be taxed to the giver.
 

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