Whether you are keenly aware of your financial responsibilities, or more of a head-in-the-sand kind of person, taxes are one area that we just can’t get away from.
But there is more to tax that just working out how much money to hand over to the government each year. There are a lot of schemes to help you save more, if you know where to look. Here are seven ways to save on your tax spend.
1. Tax-free college savings
If you are a parent, then saving for your kids’ college fees is smart on two levels. Not only are you investing in your child’s future, you are making a tax saving on this money. Talk to your bank about your options.
2. Health care comes with financial benefits
If you are employed and are offered a flex plan or other medical scheme of some kind, do consider it. These plans allow you to divert part of your paycheck to a medical costs account that you can use to pay your medical bills. You will be spared both income and Social Security tax on this money, saving you between 20% and 35% on medical expenses.
3. If you are employed then save more for retirement
Choosing to lower your wages by increasing your retirement contributions may not feel fab in the short-term, but it is a good option for two reasons. Firstly, you bulk up your retirement fund, and secondly, this lowers your tax cost.
4. Thinking of starting a business?
Business owners have some say over how they pay tax on their earnings. Funds can be kept within the company’s cash flow, rather than paid out to you as your wage allowance. As long as you leave yourself enough to live comfortably on, of course.
This is a great example of something to discuss with a qualified accountant. When this is done right, it is both sensible and very beneficial. Just do not get it wrong and wind up in trouble with the government.
5. Do not rush to pay off your mortgage
Although this might be the opposite of the message instilled by your parents, keeping your mortgage going longer might be worth a closer look. In the US, interest on mortage payments is tax deductible.
So from a tax perspective, keeping your mortgage going longer may be beneficial to you. Of course, do not forget to compare this potential saving to the cost of the interest. But it is worth getting your calculator out and seeing what works for you here.
6. Get on board with energy efficiency
The US government has a scheme to reward energy-efficient homeowners with tax credits. Getting new wall or loft insulation, windows, or in some cases solar panels can result in a government reward.
7. Do not pay your tax bill late
Seriously… I know so many people who have done this more than once. And the fines are not small.
Getting your taxes done is not the time to procrastinate. I know it is boring, and sometimes a little complicated. But as with anything, knowledge is power.