Head into tax season stress-free with these tax-reducing tricks.

Every year after tax season, people are on a mission to save more on their taxes than they did the year before, and this takes dedication and know-how. Learning the ins and outs of your state’s local tax laws in combination with these tax deduction tricks can help save money in a number of ways.

These 5 ways are sure to help!

Retirement Fund

Feeding your IRA can reduce your taxes in two ways. It lowers your taxable income first off because it is a pre-tax contribution, and secondly it can be a tax write-off in general depending on the type of plan. However, even though some IRAs are tax-exempt, traditional IRAs are tax-deferred meaning the taxes eventually need to be paid (usually at retirement). Another potential option is a Roth IRA which may not reduce your tax bill, but may soften the tax blow come retirement. This retirement account allows the individual to set aside after-tax income up to a certain amount each year. After age 59.5 earnings and withdrawals become tax-free.

Flexible Spending Plans

It is allowed by some employers to decrease your tax bill by spending that money on things, such as medical expenses, that you would’ve normally purchased anyways. These flexible spending plans allow the individual to pay for certain expenses (health care, etc.) with tax-exempt dollars. Employers deduct a certain amount of (tax-free) money from the individual’s paycheck, and put it into an account that allows the individual to access the funds when the expenses come up. This spending plan also reduces your taxable income, reducing your taxes in that way as well.

Give to Charity

The most well-known and well-tested tax deduction is giving to charity. Most of you know that donating clothing, toys, household goods or money can be a tax write-off, but there are other ways as well. Volunteering can be a tax write-off, but be careful because your time itself is not. However, the cost of traveling to a charitable event of which you are a representative can be. Also a possible deduction is buying something FOR a charity, such as a computer, can be a deduction as well. Keep in mind that the itemized deductions must total more than the standard deduction to be eligible.

Bundle

For tax payers that need a larger tax return one year than the next, you can itemize your deductions and bundle two years into one. Carol W. Thompson, a tax professional out of Maine, recommends itemizing your deductions every other year so that you can combine the two years of deductions putting you over the standard and allowing you to combine with the smaller deduction amounts that wouldn’t be eligible otherwise.

Shop! (Only if you need something)

The notion that buying things at the end of the year (computer for a home business, etc.) is a quick and easy deduction, but this is a common misconception. Where it very well could be a tax-write off, if it is something you don’t need, you could be paying more money than will be deducted on your taxes, because when buying “stuff” the amount deducted is usually only a fraction. Purchasing items you don’t need, just to get a tax return on them is a waste of money in the long run as you will only see a slight return on that item, especially if it is something that is set to last for a few years and has a depreciating value.

“Planning is the key to taxes. If you don’t plan, then you’re not going to get anywhere.”- Carol W. Thompson

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Each tax write-off can increase your disposable income, so it is best to be well versed on your state and local tax laws. Check out these frequently asked questions and information on Nevada’s tax laws, courtesy of Ashley Quinn, CPA.

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