Seven Easy Ways to save lot of Taxes

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Video Link : https://youtu.be/1kO_wdbOCi4

𝑺𝑬𝑽𝑬𝑵 𝑬𝑨𝑺𝒀 𝑾𝑨𝒀𝑺 𝑻𝑶 𝑺𝑨𝑽𝑬 𝑳𝑶𝑻 𝑶𝑭 𝑻𝑨𝑿𝑬𝑺

This video discusses easy tax saving techniques that everyone can use. These techniques are commonly used among a lot of people that have significant income. But even if you don’t have lot of income, if you carefully understand and analyze and then talk to your accountant or tax prepare, tax planner, you could use these techniques to save a lot of money in taxes.

1. Charitable giving.
2. Health savings accounts (HSAs)
3. Individual retirement accounts (IRAs).
4. Own a home.
5. Retirement plans.
6. Self-employment.
7. Stock market/mutual funds.

𝐂𝐇𝐀𝐑𝐈𝐓𝐀𝐁𝐋𝐄 𝐆𝐈𝐕𝐈𝐍𝐆.

You could donate money and also appreciated securities to approved charitable organizations. Then you could deduct the value of the securities at the time of donation. But you do not have to recognize a gain from the sale. For example, let’s say you bought some stocks of Apple Inc. when it was like a hundred dollars. Now you’re selling it at the current market value, obviously, it’s more than a hundred dollars. So your cost is still a hundred dollars. But your a charitable deduction is going to be much higher because it’s calculated at the current market value. And the difference between cost and the charitable deduction amount, does not have to be recognize as a gain for tax purposes. This will save you lot of money in taxes, but still donate a lot of money to charity as well.

𝐇𝐄𝐀𝐋𝐓𝐇 𝐒𝐀𝐕𝐈𝐍𝐆𝐒 𝐀𝐂𝐂𝐎𝐔𝐍𝐓𝐒. (𝐇𝐒𝐀𝐬)

You can put money into an HSA and then your contributions are tax deductible. You could use the money from the HSA to pay for your health care expenses, such as deductible, co-pays, for drugs etc. Those distribution are not taxable.

𝐈𝐍𝐃𝐈𝐕𝐈𝐃𝐔𝐀𝐋 𝐑𝐄𝐓𝐈𝐑𝐄𝐌𝐄𝐍𝐓 𝐀𝐂𝐂𝐎𝐔𝐍𝐓𝐒 (𝐈𝐑𝐀𝐬).

The next strategy is contributing money to individual retirement accounts commonly referred to as IRAs, or individual retirement arrangements. There are two types, traditional IRAs and Roth IRAs. Traditional IRAs is the one that allows you to take a tax deduction if you contribute. When you put money into your IRA during the tax year from January 1st to December 31st and till April 15th in the following tax year as well, generally you will be able to take the deduction. Now, specially this year in 2020 due to special arrangements made by IRS, you could make IRA contributions all the way up to July 15th.

This is one of the things that I do with most of my clients every time I Prepare a tax return. I analyze the returns to see if they could still put money into a traditional IRA and take a tax deduction. I have seen a lot of clients get the benefits up to around fifteen hundred or close to two thousand dollars by putting money away into an IRA.

For 2019 tax year, the limits are if you are below 50 years of age, you could put away a maximum six thousand dollars just for you. Also, if you have a spouse, you could contribute money towards your spouse’ IRA as well. For a couple, could put away twelve thousand dollars. That is a twelve-thousand-dollar deduction in your taxable income, a huge saving. Now, if you are above 50 years of age, then you could put up to seven thousand dollars per an individual. Imagine if you do this for multiple years, those savings are going to add up a very significant amount.

𝐎𝐖𝐍 𝐀 𝐇𝐎𝐌𝐄.

Next tax saving strategy is to own a home. How are you going to save Texas by owning a home? There are many ways. First of all, home ownership brings a lot of other benefits other than tax savings. You will have the pride of owning a home. And also your family will have a lot of space to live. We know that those are all good benefits.

Most people purchase homes by borrowing money through a mortgage. So when you get the mortgage for your principal home, you have to pay the interest on your mortgage every month. At the end of the year, you get an interest statements from your mortgage company that you can use for a tax deduction. And not only that, the property taxes that you pay on your house is tax deductible up to a maximum of $ 5,000 for an individual and $ 10,000 for a couple. Those tax-deductible expenses could lower your taxable income.

And also, one other thing with owning a home. usually Home values appreciate most of the years, except in a recession or a in a declining real estate market. Let’s say you bought a house five years ago and now you are selling that house at a profit. For example, you bought a house for $ 300,000. Now you are selling it for $ 500,000. You made a profit of $ 200,000. As long as you live in that a house or a certain number of years, you don’t have to pay any taxes on that profit. IRS allows an individual to exclude up to $ 250,000 in taxable gains and for a couple of married filing jointly could exclude all the way up to $ 500,000. That is a huge tax benefit.

𝐑𝐄𝐓𝐈𝐑𝐄𝐌𝐄𝐍𝐓 𝐏𝐋𝐀𝐍𝐒.

Next one is retirement plans such as 401ks, 403bs, SEP IRAs, Simple Contributions to these accounts reduce your taxable income. These are tax deferred accounts. That means they are not tax free. When you put money in, they will not be taxed to you because it goes into the retirement accounts. Then The money will be invested inside that account, and then when those investments grow, you don’t pay any taxes. So, the growth of your investments is tax deferred. However, when you take the money out, you have to pay taxes for the all of the distributions.

The idea here is most in most people’s situations, during the working life they have higher income and they are subject to higher tax brackets. But eventually, when they get to retirement, income will be lower. And then when they withdraw the money from the retirement plans, the tax brackets will be lower for them. That way you save the taxes on distributions at a lower tax bracket. Also, when you invest in a tax deferred account, you could invest a lot higher amount.

𝐒𝐄𝐋𝐅-𝐄𝐌𝐏𝐋𝐎𝐘𝐌𝐄𝐍𝐓.

When you are self-employed compared to just working on a job, there are lot of perks and benefits comes with it. When the Tax Cuts and Jobs Act, the Trump tax law, was introduced, the law eliminated deduction of job-related expenses on schedule A.

If you are self-employee, still you could claim those deductions under schedule C. For example, if you are a salesperson working for a company and then you drive your personal vehicles to do sales for the company, and the company is not reimbursing you separately for that. Under the previous tax laws, they were deductible under unreimbursed employee expenses. Now, after 2019 tax laws, those deductions went away.

However, let’s say if you’re a salesperson work on under a 1099 arrangement, the company pays you and issues you a 1099, not a W-2, then those mileage will be deductible under your schedule C. The same way when you use your home for work you will be able to take a home office deduction as long as you file self-employment tax forms.

There are a lot of other benefits to being self-employed. this is a good time for people to think about being self-employed. Also, we saw during the pandemic stimulus packages self-employed also were given lot of other benefits as well.

𝐒𝐓𝐎𝐂𝐊 𝐌𝐀𝐑𝐊𝐄𝐓/𝐌𝐔𝐓𝐔𝐀𝐋 𝐅𝐔𝐍𝐃𝐒.

Another tax saving strategy would be to own stocks or mutual funds in the stock market. If you have a brokerage account that could go buy the he shares of stocks of companies. So that way those companies will grow, and the capital appreciation is not taxed until you sell those securities.

Those are seven tax saving strategies that anybody could follow. They are a lot of nuances to those things. However, as long as you know that it’s out there you could read about them and talk to your advisers. Implement any of these strategies or all of them and you will save lots of money in taxes.

Seven Easy Ways to save lot of Taxes

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