The easiest way to reduce the amount of your taxable income is to contribute the maximum to your 401(k) or there tax deferred savings plan. This process is simple to do, just visit you Human Resources Department to obtain the proper forms. From there, money will be withdrawn from each paycheck and deposited in an account under your name, which will be invested in the instrument of your choice.
2.Use a Flex Spending account for your medical expenses
A flex spending account is a fund that you can use to pay your planned medical expenses. And the best part, the money is tax-free. That is right, simply fill out the forms at your HR department and money will be withdrawn from your check before the taxes are taken out. Where else can you pay for your doctor's services using tax free money? Please be sure to read all the details of your plan, as plans can vary.
3.Use a business entity to deduct “business related expenses”
If you are in business, make sure to form an “official” company using the structure that makes the most sense for your situation. As a business owner, you will be able to deduct certain expenses from your taxable business income. Examples of things you can deduct: Your office space in your home (% of rent), vehicle usage and depreciation, computers, printers, meals, etc. If you are in the right type of business, you may be able to deduct nearly every expense through your business. Please check with your accountant for clarification
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4.Buy a Home
Are you a renter? If so, you are paying a lot more taxes than you would if you had purchased a home. Interest on a Mortgage Loan is tax deductible. The bottom line is buy… don't rent. Buying is also a good way to build equity… that is you are treating your home as a piggy bank, because a portion of your mortgage payment goes to equity in your house. Renting is like throwing money out the window.
