Tips To Save On Taxes

As a law abiding citizen it is your duty to file your tax returns with the IRS. There is much you can do to ensure that your personal income tax returns are minimized. One of the best ways is to contribute regularly to an IRA. Earnings from various sources including your salary, income if you are self employed, and even income from alimony can be contributed to a deductible IRA to save hundreds of dollars in taxes. You are eligible for deductions whether you opt for itemized deductions or not.

Alternatively, you can contribute to a Roth IRA. Although such contributions are not tax deductible, you can end up with no taxes on future earnings. Roth IRAs on the other hand include benefits opposed to those of traditional IRAs. Tax-deductible contributions cannot be made to a Roth IRA. Instead, the money grows tax-free and you need not pay any federal or state taxes, depending on the state you live in. Premature withdrawals do not attract any penalty. It is advisable for tax payers who will have a higher tax bracket at the time of retirement to contribute to Roth IRAs. There are no age limits, however, there are income limits, although they are set much higher. To qualify for a full contribution the income level is set up to $105,000 and $105,000-$120,000 for a partial contribution. Married couples filing jointly the level is set at $166,000 to qualify for a full contribution and $166,000-$176,000 for a partial contribution.

While IRAs can help you save on taxes it is also important to contribute to a health savings account or HSA. There are numerous benefits to be availed of in terms of taxes. Contribution are tax deductible whether you opt for itemized deductions or not. In addition, earnings on HSAs are tax deferred while any withdrawals made for medical expenses not covered by insurance are tax free.

Child education tax credits present great opportunities for parents with children attending college to save on taxes. Reductions in federal income tax of up to $1,000 are awarded for each dependent child under the age of 17 who is a US citizen or resident alien. Another area of saving is dependent care tax credit for working parents who pay for the care of a dependent for children under 13. Parents are eligible for a maximum credit of 35% of qualifying expenses. The deduction limit is $6,000. In addition, deductions of up to $4,000 can be claimed for higher education tuition. Deductions of up to $2,500 can also be availed of on student loan interest irrespective of whether you opt for itemized deductions or not.

If you are employed you can still deduct business-related expenses if you haven't been reimbursed by your employer for making any purchases. A typical example is business-related travel expenses. However, you will need proof for the IRS in the form of receipts so make sure you save them. With so many ways to save on taxes it would be prudent to maintain a last minute deduction checklist. This will lessen your burden at the time of filing your tax returns.

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