Do you want to save as much money as possible on your income taxes this year? Of course, you do!
Many people assume that they can’t save very much on their taxes if they don’t own a business or property. While it’s true that those without businesses or rental properties don’t have nearly the same tax-saving opportunities, there are still a handful of ways for them to save on taxes.
Use these 23 tips to save your family thousands of dollars on taxes this year!
1. Maximize Your 401(k) Employer Matching
Because a 401(k) consists of tax-deferred money, it’s in your best interest to maximize your contributions—at least up to the amount that your employer is willing to match.
2. Take Advantage of the American Opportunity Credit
Claim this $2,500 maximum annual credit if a family member is attending college. If you are above the income limit for the credit, the person eligible might want to claim it.
3. Convert Your IRA to a Roth IRA in a Low-Income Year
Doing this will make your tax expense minimal, and you will enjoy non-taxable distributions down the road.
4. Donate Unwanted Items to Goodwill or Another Charitable Organization
Hunt through your garage, shed attic, and closet for items (in good condition or better) that you could donate. Take plenty of photos and get a receipt for documentation purposes.
5. Hold a Yard Sale for Your Unwanted Items
A yard sale will allow you to earn extra tax-free income. Just be sure to sell the items below their original cost.
6. Prepay Medical Expenses By the End of the Year
If you itemize deductions, prepay your medical expenses by year’s end. If you don’t have the money right now, you can charge a credit card and claim the deduction for this year.
7. Log Medical and Charitable Service Mileage
For every mile driven for medical purposes, you can deduct 20 cents. For every mile driven while helping a charitable organization, you can deduct 14 cents. Document everything!
8. Alternate Itemized Deductions and Standard Deductions
If you’re able to group many of your deductions in one year, you can opt for itemized deductions that year and the standard deduction in the following year.
9. Buy Your New Car Before the End of the Year
Consider making a vehicle purchase before the year’s end. This could allow you to deduct sales tax on the vehicle, depending on where you are in relation to the SALT tax deduction.
10. For Losses on Stocks or Mutual Funds, Consider Selling Investments With Large Amounts of Unrealized Gains
Doing this could allow you to use your losses to your advantage, but of course, this is something you will want to check with your financial or tax advisor first.
11. Consider Offsetting Capital Gains from the Sale of Stock By Selling Stocks in a Loss Position
If you plan to replace the sold stock, you will need to wait 30 days before buying the company’s stock again. Confirm with your financial advisor that this aligns with your financial goals.
12. Gift a Family Member Stock Rather Than the Cash from the Sale of the Stock
By allowing them to sell the stock, they may be able to get a tax break—particularly if they are in a lower tax bracket than you.
13. Consider Donating Appreciated Stock to Charity Rather Than the Cash From the Sale
If you’re going to donate to a charitable organization, the appreciated stock could give you a much greater tax benefit.
14. Invest in Municipal Bonds
Doing this could allow you to reduce your taxable income, as these bonds are usually tax-free.
15. Consider Investing in an Annuity to Defer Taxes on Income From Investments
If you don’t plan to use the income from investments for a while, ask your financial advisor whether investing in an annuity might be a smart move for you.
16. Maximize the Student Loan Interest Deduction
By paying down interest on your student loans, you can reduce your taxable income.
17. If You’re Dealing With the Alternative Minimum Tax (AMT), Try to Reduce It
Please speak with your tax advisor about reducing this tax and avoiding it in the future. In some cases, postponing tax preference items might help.
18. Make Your Deductions Audit-Proof
Simply put, you should make sure that you have thorough documentation for each of your tax deductions.
19. If You Support a Parent, Look Into Claiming Them as a Dependent
As long as no sibling pays for more than 50% of that support, there may be a way for each of you to claim the exemption.
20. Look Into a Health Savings Account (HSA)
While you may not be able to deduct your medical expenses, putting money into an HSA could allow you to reduce your taxable income.
21. Consider Renting Out Your Home
When you rent out your property for fewer than 15 days, the income you earn is actually tax-free.
22. Remember to Deduct Alimony Payments
If you have a divorce decree before 2018, you can deduct alimony payments.
23. Set Up an Accountable Plan With Your Employer
Getting reimbursed on an accountable plan means you won’t have to pick those expenses up as income.