With the winter on our back, everybody is settling for the upcoming cold season. Would you like to use your energy in gathering tax deductibles before the year ends? Everyone wishes to cut down on their tax payment without doing anything for the same.
Here are some tips to maximize your federal tax deductions.
- Invest maximum in your 401(k) plan: Whatever money you put in your retirement plan such as 401(k) is available for tax deductions. For anyone younger than 50 years, it is possible to contribute up to $17,500 and $23,000 for people above this age. According to financial experts, it is best to invest $10,000 at the age of 25 instead of $50,000 at the age of 55. You should try to invest maximum in your 401(k) plan for tax deductions and a safe future.
- Start a health savings account: DO you have a high-deductible health plan? Most of the employers are offering high-deductible health plans to their employees because of the economic crunch. It might be an excellent idea to start a health savings account to face any medical emergency in future. Under a Health Savings Account, you can contribute up to $3,250 per person and up to $6,450 for your complete family. The money you put in heath savings account is tax-free and it can be rolled over to the next year if not used.
- Donate to charity organizations: Charity is a noble cause and it can help you maximize your tax deductions. You can donate used toys, clothes, household items, and tools to the charity. Choose a charity that resells your donations and collect a receipt for an equivalent amount. Make sure that the charity is registered under federal 501(c)(3) so that you donations can be recognized. It is best to study the IRS rules for charity tax deductions before making a donation.
- Earn energy tax credits with home upgrade: The Federal Government has several policies to encourage people to save energy. Some minor upgrade in your house can help you save your taxes. You can start by adding more insulation to your home including heat pump, energy-efficient windows, and spend some money on door insulation. You can cut down your taxes with an electric plug-in vehicle. House with energy-saving designs and construction practices can save tax under different state government policies.
Know more about tax withholding: Do you receive regular refund checks from IRS? Most of the people prefer to withhold excessive money for IRS without realizing the fact that the money is sitting idle with the federal organization without paying any interest. Get in touch with your accountant and find out the right amount that you should withhold for your IRS payments.