How to Save Money on Your Taxes – 9 Tips

Understanding the best ways to reduce how much you owe for taxes can be huge for saving a significant amount of money.Being as informed as possible is going to be very important for saving money with taxes because then you will have the best information to use.

Getting helpful information is the key to understanding the best tips to save on taxes.

Here are 9 of the best tips to utilize:

Select the Correct Filing Status

Adjust Your W-4

Put Money into College Account

Add to an IRA

Put Money into 401k Account

Give Away to Charity

See if you qualify for Earned Income Tax Credit/EITC

Have A Professional CPA Do the Work for You

Review the IRS Website for More Tips

Once you start using these tips, you can start saving money and saving time filing taxes each year.

Through this post I hope to give you helpful information on how to save money on your taxes and how important this can be.

Select the Correct Filing Status

Selecting the correct filing status will get you started on the right path with fewer complications.

Take your time doing a little research into which of the following is you’re filing status:

  • Single
  • Married Filing Jointly
  • Married Filing Separately
  • Head of Household
  • Qualifying Widow with dependent child

Once you figure out which one of these is you’re filing status, you will be able to understand your options for that filing status.

Each of these choices will have to pay different amounts of taxes and it is important to make sure that you choose the right one for your current situation.

Single = Taxpayers who are not married or are divorced.

Married Filling Jointly = Married taxpayers who file jointly and most often this option will give a lower tax rate.

Married Filing Separately = Married couple who file separately.

Head of Household = Unmarried taxpayers who are covering over half the cost of taking care of a house for themselves and a dependent child or parent.

Qualifying Widow with Dependent Child = Taxpayer who has lost a spouse in the last two tax years and has a dependent child.

If you qualify for more than one of these taxpaying statuses, then do some research and make sure to choose the one that doesn’t tax you as much.

You can always change your W-4 form if your situation changes down the road.

Adjust Your W-4

Adjusting your W-4 can help you have just the right amount taken out of your paycheck.

A W-4 form is something that is completed to let your current employer know what amount of money needs to be withheld from your paycheck for federal taxes.

There are 8 steps to fill out for your W-4 form including:

  1. Your Information
  2. Your Social Security Number
  3. Your Marital Status
  4. Name Changes
  5. Total Allowances*
  6. Additional Allowances
  7. Exempt from Withholding
  8. Attest to the Truth

The key step to focus on here is to look at your total allowances and see if you need to reduce or add allowances.

Extra allowances that you have claimed, will result in less income tax taken from your pay. The more allowances that you claim, the more money that you take home now.

I try to have slightly more taken out of my paychecks than I have to so that there is extra money in the form of a tax refund in April.

Ideally, coming up with a way to have just enough taken out of your paycheck to pay for your taxes and not have too much taken out would be the goal.

Keeping your W-4 form up to date with where you are at is likely going to keep getting the right amount of money taken out of your paycheck.

Put Money into College Account

Putting money into a college account could help keep you from having to pay state income taxes on that amount. You will still need to pay federal taxes on that amount put in but you can reduce or prevent any state taxes from coming out of this account.

A popular college account is the 529 plan, which is run by a state or educational institution.

Every state has a 529 plan and this is a college account where you can put a certain amount of money into this account that will not be taxed for state income tax. But read more about each state’s 529 plan here.

Add to an Individual Retirement Account = IRA

There are two different individual retirement accounts that you can put money into, Roth IRAs and traditional IRAs.

Putting money into a Roth IRA means that when you take money out of your account in retirement that your withdrawals will not be taxed.

Whereas putting money into a Traditional IRA, means that only the year you put money into the account will not be taxed.

Understanding which one of these IRAs to use is important so that you can save money on taxes this year or save money on your taxes years from now when you withdraw money from this account.

Putting money into a Traditional IRA will allow you to not get taxed on those contributions but only if you qualify.

For this tax year, you will not be able to have your contributions deducted from being taxed if any of the following are true:

  • You are covered by a retirement option at your work
  • You are married and filing jointly
  • Your Adjusted Gross Income is over $120,000

You can put up to $6,000 per year into an IRA account and $7,000 if you are over 50 years old. Determining if you can put money into an IRA account, could help you save significantly on taxes.

If you already have a 401k account at work setup, then putting money into an IRA probably will not save you money this year.

Determining if you can put money into an IRA account, could help you save significantly on taxes.

Put Money into 401k Account

Putting money into a 401k account is going to keep that money form getting taxed. Many times an employer will offer a 401k plan but there is always the option of starting your own individual 401k account.

The IRS will not tax what you put into a 401k account and for 2019 you can put up to $19,000 per year into this account. If you are older than 50, then you can put $25,000 into this account.

Often times your employer will match some or all of what you put into your 401k account so this can be a significant way to not have your money taxed.

The money that you put into your 401k account must come from your paycheck connected with your main job. You can’t add money earned from another job into this 401k account.

Give Away to Charity

Giving money to your favorite charity is going to mean that you are not taxed on that amount of money. This can often be an overlooked way to not have to pay taxes because there is more than just money that is tax-deductible.

TV
TVs Sold or Given Away Could be Tax Deductible

Look over this list of tax-deductible items:

  • Money
  • Clothes
  • TVs
  • Cars/Vehicles

It is important to understand that for these items to become tax-deductible you must go through an itemized deduction.

If you have a lot of items that could be tax-deductible or items that you gave to charity, then potentially going through the process of doing an itemized deduction could be worth it to you.

But you should determine how much more you are likely to save by doing an itemized deduction and if it is really worth your time.

The standard deduction is much less work. and if there is a small amount more that you would save doing an itemized deduction, then it is probably much less of a hassle to take the standard deduction.

See if you qualify for Earned Income Tax Credit/EITC

There are a lot of different qualifications for the EITC but it is still worth looking into to see if you qualify. The EITC is usually given to low to moderate income earners, up to $56,000 per year gross income.

If you are filing as a single taxpayer with no children, then you are not as likely to get this tax credit.

But for taxpayers who have one or multiple children then they could likely qualify for this tax credit. A tax credit will result in you getting significantly less money taken out of your income.

For example if you paid $6,000 in taxes for this year and you received a $1,000 tax credit, then you would be given that $1,000.

So instead of having parts of your income not taxed you would be directly given money, which is a huge boost.

Check the IRS website to learn more about whether you qualify for this tax credit or another tax credit.

Calculator Being Used
Have A Professional CPA Do the Work for You

Have A Professional CPA Do the Work for You

Have a professional CPA prepare your taxes to help prevent you from missing out on a tax refund. If you have a simple filing status, then this might not be necessary for you.

But if you’re filing status has recently changed significantly because a big life event, then possibly using a professional could be very beneficial.

A professional CPA looks at taxes for a living and knows how to file taxes properly and has much more knowledge about the entire process.

Letting someone like this file for you could help you get the best tax refund possible as well as find areas where you could not be taxed as much.

They could also help you determine if you should take the standard deduction or whether you should perform the itemized deduction.

If you have a friend who is a CPA, see if they can give you a good deal.

Or if you and a couple other friends want to have a CPA file all of your combined taxes, then you could all ask for a discounted rate since all of you are contributing business.

Paying someone to do this for you could be paying money to make money because there could be money that you did not realize you qualified for and could end up having less money spent on taxes.

Money in Hand
The IRS Website has More Tips to Save Money

 

Review the IRS Website for More Tips

Visiting the IRS website could help you stumble upon a new way to save money on your taxes. Understanding any updates to this tax season compared to last season could be surprisingly important for how much you are getting taxed.

The 2018 standard deduction for single filers was $12,000, a big jump compared to the 2017 standard deduction of $6,350.

The 2019 standard deduction for single filers is set to be $12,200.

Most people opt for the standard deduction because it is less work than doing an itemized deduction.

The main reason people take the standard deduction is because they will most likely save more money. Itemizing can be a lot of work to track down all of your receipts and most of the time is not worth doing.

Visit the IRS site to find all kinds of extra information. They even have a free tax withholding estimator to help you quickly understand what your taxes will approximately be.

Research Effectively and Take Your Time

Research effectively to determine you’re filing status and all the important tax details. Take your time doing this so that you don’t miss out on any tips that could save you some money.

If you enjoyed this post and want to learn how to budget money better, then read How to Budget Your Money Better.

Use some or all of these tips to start getting less taken out of your taxes or even receive money directly.

I hope that you liked this post and found useful tips on how to save money on your taxes.

If you have any questions, please leave them below and I will answer it to the best of my ability.

14 Replies to “How to Save Money on Your Taxes – 9 Tips”

  1. Really appreciate the detail you went into about ways a person can save when doing taxes. I used to do our taxes and I can see that I missed a number of opportunities for saving money. Very comprehensive and well written – thanks for putting the time and effort into this. I hope people take the time to read and follow this. I believe the more options we are aware of and the more we make use of those options – the better off all of us will be.

  2. Hi Jesse Lee

    This is a great guide for people to consider before filing their taxes. I love how you laid out the items in an easy way for a reader to follow. Your information is clear and concise.

    Filing taxes is a task many of us dread but it is necessary and your tips for consideration in order to save money are great ones!

    Thanks for this informative post

  3. Great information, very informative yet not overwhelming. I was not aware of the tax credit before reading your post.. very interesting. I will have to look into that more.

    Thank you for sharing.

  4. Hello Jesse! I haven’t had to file taxes in years, because I’m on SSD. But, would you believe, I’m actually looking forward to having to file? I would love to start earning money again. Much of this information is new to me. Thank you so much for sharing!

  5. Great article! One question though. When filing taxes for a first year business that is just beginning to generate revenue, should this be included on my personal tax return? As recommended, I will check out the IRS site, but was curious what you’ve learned. Lots of valuable information.
    Thanks,
    Beth

    1. I am happy that you liked this article!
      I would include any revenue you have generated through your business just to error on the side of caution. Even if you have made a lot or a little money with your business for the 2019 year, getting used to including your new business into your taxes is probably a smart move.
      Most likely your business is going to have grown significantly a year from now.
      If you have taken the time to become more familiar with the process for reporting your business for tax purposes, then you are going to be extra prepared.
      Hope this was helpful and I would check with the IRS website too.

  6. Very useful information about tax filing and how we can take advantage of the opportunities you’ve outlined about saving money. Each country has different tax laws and yes it helps to acquaint oneself with the IRS site to get the information and the know how of tax filling. Otherwise it helps to get a professional CPA to help take advantage of these opportunities as you’ve suggested. They can also help in drafting a will for you and structure it in a way that will help you save on estate duty as well. Great article, thank you.

    1. I am glad that you found this post useful!
      There are many reasons why a CPA could be very valuable for tax purposes and writing a will.
      I am happy that you liked this article!

  7. Hi there Jesse.
    Your article is well detailed about taxes. I was thinking about starting to use the IRS, but I did not know that there are two ways in using them. So, I have now to do more research about Roth IRS. I want to start saving for my retirement and I did not know where to start, so reading your article gave me some ideas.
    Thank you ( I just bookmarked your article)

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