Have you ever wondered about saving your income tax? Right, It sometimes really doesn’t feel good to pay that additional measure of income, which you could have certainly utilized to buy that amazing phone or the recently launched model of a car you’ve been eyeing upon ! Though it’s a challenge to avoid income tax levied by the Federal Government yet, there are a number of ways you can put in some extra money into your account, the one which is absolved from taxes legally.
In our daily life, there are numerous activities that need attention. You can try to chip away some additional tasks and get paid once the work has been completed. You can mark this income against your own share of things such as computers, education, professional association dues, etc. So here, your initial independent salary provides a shelter for you.
Almost every one of us wishes for a high pay raise. But in lieu of a pay raise, if your company covers up all your work expenses, it could definitely be more than a blessing. Reimbursements are not counted in as your income until they are registered in your company’s accountable plan. It will likewise assist in saving on the taxes of your organization too! So, the next time you are promoted, you know an idea that would save yours and your company’s taxes.
Your commute also has something in store for you! You can enroll in your organization’s commuter benefits, which will be deducted from your salary before it becomes taxable. By and large, employees save 30% or more when they avail of this benefit. But wherever saved, it could be a fortunate thing!
Are you a shopping freak? Maybe you can become one or try to purchase everything on your wish list together. The partial refund you get when you buy a lot of items or your groceries altogether is exempted from taxes. So, your shopaholic nature can also save you some money while you buy your favorite clothes, shoes, etc.
All those assets you received, in the form of property, funds, shares, gold, and many more, when one of your loving elders passed away is exempted from income tax. But the income you get on selling off the property will definitely become taxable. So, being an heir exempts you from taxes on your inherited property.
- Credit Card Rewards
When it comes to credit cards, choose wisely. Some types of credit cards reward you every month, while some just offer general cashback rewards. The rewards you receive on a monthly basis are the ones that actually make a profit to you. Usually, the rewards offered due to credit cards are seen as rebates. To make your rewards skip the hand of taxes, it depends on the way you’ve earned it.
- Rent it out
You can rent out your property and therefore deduct on tax since you have to make up for mortgage interest and a number of other expenses like maintenance costs and repairs needed from time to time. Additionally, you are also bound to receive rental income from that very property.
Care to babysit in exchange for a few dollars? These extra dollars will be tax-free for you! Probably, there are a lot of people out there who have their properties in more than one place, but they cannot live in all of them at the same time. If you happen to find one of them, take in as an opportunity to live there, taking care of their property as a substitute to pay your rent. This will save you some money too!
Check also: Tax debt representation
- Barter System
We are all aware of how the barter system worked during historical times. This same system can land you up with some good benefits. Ever tried to help a friend, and then he/she would return your favor by repairing your computer or mending your fences, perhaps? This is another way you could get some profit by getting favors from your friends or neighbors and donating a buck for it. Possibly, it could save up some of your money.
Donating a few bucks to specified relief funds can also save up some tax. Tax-deductible donations can take the edge off your taxable income. Perhaps, the most effortless approach to spare salary and carry out something worth being thankful for is to give.
- Home Ownership
Your own home offers a lot of perks for you. When you lived in that rented flat, all your rent went to your landlord. As a homeowner, you can deduct mortgage interest and property tax payments. The returns on homeownership, known as ‘imputed rent’ are exempted from taxes.
- Health Savings Account
You can put aside some of your money in the form of pre-tax dollars for your future healthcare expenses. Pre-tax dollars are deducted from your income before retaining it for tax calculation; you don’t pay tax for this very portion of your income. It also helps you save for your healthcare when needed.
- Vend Off
There are ample of items we just buy and keep over. You can put up all those items for sale that are no longer in use for you. The money you receive in return is non-taxable as long as the earnings from them are lesser than what you paid for. On the off chance, if you happen to sell it at a higher price, making some profit, you’ll have to account for it in your taxes again.
- Municipal Bonds
These are your debt obligations to fund your capital undertakings. The interest received by investing in municipal bonds is emancipated from taxes. However, capital gains made are considered taxable. If you happen to live in the state that issued the bond, then the state tax is usually exempted in most cases.
- Sweet Presents
One of the most reasonable approaches to move your stocks is to give them to your youngsters as a blessing, thereby shifting your profits a little lower. But there are cut off points to this one: you can only give each child up to $15,000 per year, which is non-taxable.
Lastly, financial planning is paramount. Plans should not be made towards impermanent goals. Tax saving could wind us up with some benefits that could further be used for one’s planned objectives that one has set for oneself at various life stages. If you want an expert’s advice on tax planning or tax filing, get in touch with Ubos.