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Iowa Tax Savings Plan 529 Article
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How to Reduce Taxes This Year
from:We’re all looking for ways to reduce taxes. Each year, there are ways to save on your taxes in perfectly legal and legitimate ways, yet people often overlook many of these items. Here are some ideas on how to reduce taxes this year.
Sell your poorly performing stocks – If you have stocks that you’re taking a big loss on, sell them. Losses on stocks are tax deductions and can save you a bundle. Of course, it’s important to know your cost basis on your stocks: meaning how much they cost you, so that you know whether or not you’re taking a loss when you sell them. If you sell them for more than you paid, then you’ll have to pay capital gains taxes. However, if you sell them for less than you paid, it’s a loss –and a tax deduction. When you’re trying to figure out how to reduce taxes, don’t forget to look at those stock duds.
Start a business – If you can turn your hobby into a business –do so. It doesn’t matter if you don’t make any money at it. In fact, if your business loses money, it saves on taxes. This is one of the most overlooked items when people wonder how to reduce taxes. By simply keeping track the expenses you incur in your little sideline business, you can save on taxes. All of your supplies are deductible, as is mileage you drive on your business and other expenses.
Go to school – Tuition is tax deductible. So, even if you’re not planning to take a full course load or pursue a degree, you should take a few classes if you’re looking for how to reduce taxes this year. You can deduct up to $4000. These tax deductions can be taken for your spouse or your kids in college, too. Not only are you learning some new skills or updating your old ones, but you’re also saving some tax money. Don’t forget that any interest you pay on student loans is deductible, too.
Get a Home Equity Loan – If you have debt, such as credit cards or a car loan and you’re trying to determine how to reduce taxes, get a home equity loan. Use the home equity loan to pay off your other debt. Not only will your home equity loan likely carry a lower interest rate, but the interest you pay on your home equity loan, like your primary mortgage, is tax deductible. Interest you pay on credit cards and car loans is not.
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