- Advertisement -

Mid-Year Strategies to Reduce Your Year-End Taxes

It may seem far off now, but the April 15 tax deadline will be here before you know it. And whether you normally get a big refund or write a big fat check, there are steps you can take to reduce your tax bill. If you want to make April 15 less taxing, now is the time to act. The IRS sets firm deadlines for retirement plan contributions, health account funding and more. Here are some mid-year strategies you can use now to lower your year-end tax bill later.

- Advertisement -

Do Some Advance Calculations

If you do not know where you stand, it will be hard to make improvements. And while you may not have final numbers, you can do some advance tax calculations.

Armed with your year-to-date pay stubs and a spreadsheet program, you can estimate the amount of taxes you may owe, or the size of the refund you might be getting. If you do not like the results, the steps outlined below can help you make tax time less taxing.

Increase Your Retirement Plan Contributions

The simplest and easiest way to reduce your taxable income is increasing your retirement plan contribution. If you already participate in your 401(k), 403(b), 457 or thrift savings plan, just contact your employer to increase the percentage you set aside.

Since very dollar you contribute to a pre-tax plan is subtracted from your taxable income, this simple strategy is an effective way to reduce your year-end tax bill. And since the money you contribute grows tax deferred, the long-term value could be even greater.

Fund Your IRA

Putting money in an IRA is another effective way to reduce your tax bill. If you already have a traditional IRA, making your annual contribution now will give the money time to grow and lower your year-end tax bill.

If you do not yet have an IRA, now is the perfect time to start one. If you are eligible, contributing to a traditional IRA could help you lower your taxes now and far into the future.

Check Your HSA Eligibility

Paying for health-related expenses is not easy, and the cost of healthcare is only expected to increase. In this environment, saving money for future healthcare costs is more important than ever before, and that is where a health savings account comes in.

A health savings account, or HSA, can help you pay for things like copays, deductibles and the cost or prescription drugs, but the benefits go far beyond those basics. In fact, opening and funding an HSA is a great way to lower your tax bill when April 15 rolls around.

Health savings accounts offer triple tax savings benefits, making them among the most attractive vehicles on the market. If you are eligible for an HSA, the money you contribute is entirely tax deductible, so you can reduce your tax hit right away.

The money you put into a health savings account also grows tax-deferred, giving you a second big benefit. And last but not least, you can withdraw the money tax-free as long as it is used for qualified healthcare-related expenses.

Nothing can eliminate the pain of filing taxes, but there are steps you can take to make tax time less expensive. The tips listed above can help you reduce your tax bill now, so you can breathe easier when April 15 rolls around.

- Advertisement -