Simple Ways to Pay Less in Taxes

Nobody enjoys paying taxes, but you can keep more of your money with the right steps. Whether you have a regular job, work for yourself, or own a business, there are ways to lower your tax bill. Here are easy strategies to help you save money while following the rules.

1. Save for Retirement and Pay Less in Taxes

Putting money into retirement accounts helps you save for the future while reducing the income you pay taxes on.

• 401(k) Plans: If your job offers a 401(k), put in as much as you can. It lowers your taxable income, and many employers match what you put in—free money!
• IRA Accounts: A Traditional IRA lets you deduct contributions from your taxable income. A Roth IRA won’t lower your taxes now, but you won’t pay taxes on withdrawals later.
• Self-Employed Plans: If you work for yourself, SEP IRAs and Solo 401(k)s let you save for retirement while cutting your taxes.

2. Use Tax Deductions to Lower Your Taxable Income

Deductions reduce how much of your income gets taxed. Here are some common ones:

• Mortgage Interest: Homeowners can deduct the interest they pay on their mortgage.
• Student Loan Interest: If you’re paying off student loans, you can deduct up to $2,500 a year.
• Medical Expenses: If you have high medical bills, you might be able to deduct some costs.
• State and Local Taxes (SALT): You can deduct up to $10,000 of state and local taxes.
• Charity Donations: Giving to charity helps others and lowers your taxable income.

3. Take Advantage of Tax Credits

Tax credits are great because they directly reduce the amount you owe. Some valuable ones include:

• Earned Income Tax Credit (EITC): If you earn a low or moderate income, you might qualify for this.
• Child Tax Credit: Parents can get a tax credit for each child they support.
• Education Credits: If you’re in school or paying for college, you may qualify for the American Opportunity Credit or Lifetime Learning Credit.
• Energy-Efficient Home Upgrades: Installing solar panels or other energy-saving improvements can earn you a tax credit.

4. Use an HSA or FSA for Medical Expenses

A Health Savings Account (HSA) lets you save tax-free money for medical costs. If you have a high-deductible health plan, this is a great option.

A Flexible Spending Account (FSA) also lets you set aside tax-free money for medical expenses, but you need to use it within the year.

5. Deduct Work and Business Expenses

If you run a business or work for yourself, deducting expenses can lower your tax bill.

• Home Office Deduction: If you work from home, you may be able to deduct part of your rent or mortgage.
• Work-Related Costs: Office supplies, travel, and advertising costs are deductible.
• Retirement Savings: Self-employed people can put more money into SEP IRAs or Solo 401(k)s to save on taxes.

6. Time Your Income and Expenses Wisely

The timing of when you earn money and pay expenses can affect your taxes.

• Defer Income: If you think you’ll make less next year, wait to receive payments until then to lower this year’s taxes.
• Prepay Expenses: Paying deductible expenses early can help you get more deductions this year.

7. Reduce Taxes on Investments

• Hold Investments Longer: If you keep investments for more than a year, you’ll pay lower capital gains taxes.
• Offset Gains with Losses: Selling investments at a loss can help cancel out taxes on gains.
• Invest in Opportunity Zones: Some investments in low-income areas come with tax benefits.

8. Lower Taxes on Gifts and Estates

If you plan to pass on money to the family, smart planning can help reduce taxes.

• Give Tax-Free Gifts: You can give up to a set amount per year to someone without paying gift tax.
• Use Estate Tax Exemptions: Planning your estate carefully helps reduce taxes for your heirs.

9. Stay Informed About Tax Law Changes

Tax rules often change, so it’s smart to stay updated. A tax professional can help you find new ways to save and avoid mistakes.

You don’t have to pay more taxes than necessary. With simple planning, you can keep more of your money and follow tax laws. The key is to take advantage of deductions, credits, and smart saving options.

Look at your finances now and start using these tax-saving strategies. The sooner you act, the more you can save!