While the holidays bring a lot of cheer and spending, there’s no time of the year where you shouldn’t think of how you can maximize your salary. One of the ways to do this is to lower the tax that you pay. If you think this is a complicated thing to do, then you’re wrong because there are simple and smart moves that can help you lower the tax so you can better save for the future. Here are four ways you can achieve just that:
Even at an early age, you can already start building that ideal retirement plan of yours. Most people start midway through their careers, but there is nothing stopping you from a more abundant retirement. The best way you can do this is by asking the contribution rates for your bracket through your employer’s matching contribution level. Once you’ve seen the rates, you can now decide the highest amount you can give. The maximum contribution to the 401K plan is $17,500.
You don’t have to be an expert at this, all you need to have is the information on your projected income and past expenses. If you aren’t comfortable doing it on your own, you can hire a financial adviser that can help evaluate your tax situation. As an example, you can choose to compute how much more you will save if you paid taxes next year rather than paying it this year or vice versa.
The best time to convert to a Roth is when you know that you will go higher up the income tax bracket. Of course, nobody wants to pay so much taxes especially when there is a workaround for it.
If you already know that you will earn more in the next year and this will cause you to be bumped to a higher income tax rate, then you can start converting to a Roth. To have a penalty-free and tax-free withdrawal from Roths, you need to have the two requirements – to be at least 59.5 and your account should have been open for five years now.
Christmas is a time for giving and what better way to take advantage of the season than to give to a charitable cause? You also get a tax deduction on the side. To be able to qualify, first pick a qualified charity. Take note that this only applies to those who choose to have an itemized deduction.
The tax deduction you can get here is the fair market value of the items you donated. These things can be money or tangible items.
There are many ways to have fewer taxes to pay. The best way to take advantage of those is by hiring a financial analyst or a tax expert so that you can see all the possible methods available to you. Also, it would be best to start planning for the next year as early as now.