As the end of the year approaches, you should be thinking about taking steps to lower your taxable income for your upcoming tax return. There are a few tax saving measures you can enact before the end of the year that will save you money. Once you lower your overall taxable income amount, you will pay lower taxes. Moving down to a lower tax bracket will provide you with considerable tax savings.
The best and most effective way to lower your taxable income is by contributing to a retirement account. You have until December 31 to contribute to either your 401k or 403b to make an impact on the amount of your income. If you don’t already have a retirement account, consider opening one before the end of the year. You may contribute or open an IRA account right up until the tax return deadline of April 15, and have it count on your return.
Consider making a charitable contribution to lower your taxable income. You can mail a check or charge a donation on December 31 and have it count for your tax return. Charitable contributions are only available however, to taxpayers who itemize. You also need to make sure you receive a receipt for your donation to properly enter it and keep a proper record.
Taking these simple steps, before the end of the year, will help lower your federal tax obligation. Making a charitable donation has the added benefit of helping someone less fortunate as well. Contributing to an IRA or 401k also increases your retirement savings as well as lowering your taxable income.
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