How to Save On Federal Income Taxes
You as an American citizen can save some money on your income tax. This is through a number of incentives steps offered by the government by following which you can get refund on your income tax that you have been paying despite your all resistance to it. Although in real terms the payback or saving may not be as great because you will be compensating your government expense in way or the other, it is good to feel that you have been able to pay less in tax on your annual income.
For example, if you have a done a charity service, either through cash donations, contribution in another form or donated some of your time to a charitable cause, you can claim back your money from income tax you have paid. Similarly, you can also get some saving in income tax by taking a part in different government schemes or incentive strategies. For example, an investment in green technology can help you save money on federal income tax.
Nevertheless, it does not completely free you from paying income tax. This money is contributed towards development projects, defense, education and other expense. This is one of the revenue earning sources for your government and without collecting any money it has no other option to finance the development projects, although you as a taxpayer are never satisfied with their wisdom.
Instructions
-
1
Participation in Employer-Sponsored Retirement Fund
If you take part in your employer-sponsored retirement plan or fund, you can get compensated in your income tax payment. This will reduce your gross taxable income and you can end up paying less tax. Also, since you are contributing to your retirement plan, it can help you save some bucks for your senior days. Make sure you know how much you have been contributing to your employer-sponsored retirement plan, and your employer itself is a contributor. -
2
Catch-up Contribution
A catch-up contribution is similar to your regular contribution to your employer-sponsored retirement plan. But catch-up contribution is made by people over 50. As it does in case of the regular contribution, the catch-up contribution to your employer-sponsored retirement fund reduces your gross taxable income and you end up paying less in the income tax. -
3
Charitable Contribution
Another way to pay less in the income tax is to make a charitable contribution. You can donate cash, time and other resources to a charitable cause and this helps you to pay less in your income tax. Be sure to take and keep all receipts at the time you make a donation. -
4
Participation in Flexible Spending Plan
If you participate in your employer-sponsored flexible spending plan, you can pay less in income tax. This is to pay a part for child care and participate in co-payments of medical bills for over-the-counter products etc. You can claim back money by presenting receipts. -
5
Investment in Green Energy Appliances
You can also get compensated in payment of income tax by investing in green and energy efficient appliances. For example, installing solar-powered equipment at your home can help you to pay less in the income tax.
