Life has a handful of constants: the sky is blue, Mondays are insufferable, and taxes are due a few months after the start of the new year. Tax season can be stressful, especially when you’re looking for ways to make the most of your hard-earned money. Fortunately, there are ways to make the filing process more streamlined and cheaper. We’ll guide you through four crucial strategies that will help you save money on your taxes this year.
Avoid Late Fees and Penalties
The first thing to know about conserving money during tax season is to stay on top of deadlines and avoid late fees and penalties. Penalties can significantly increase the amount of taxes you owe, wiping away your potential savings. Ensure that you file your tax return by the deadline, request an extension if necessary, and make timely estimated tax payments to avoid underpayment penalties. It’s also worthwhile to invest in reputable tax preparation software or consult with a tax professional who can help you avoid errors on your tax return.
Contribute More to Retirement
Contributing to retirement accounts, such as 401(k)s or IRAs, is an excellent way to reduce your taxable income and save on taxes. The money you invest in these accounts is tax-free until you withdraw it during retirement. By increasing your retirement contributions, you benefit from tax deductions while also securing your financial future. You can also consider contributing to a Roth IRA, where you pay taxes upfront but enjoy tax-free withdrawals in retirement.
Investigate Child Tax Credit
If you’re a parent, learning about and taking advantage of the Child Tax Credit (CTC) can provide significant tax savings. Child Tax Credit is a tax credit provided by the government to help families with children reduce their overall tax liability. It aims to ease the financial burden of raising children and improve their quality of life. To qualify for the CTC, you must have a dependent child who is under 17 years old at the end of the tax year. The credit is fully refundable, meaning that even if you owe no taxes, you can still receive the credit as a refund. Make sure to claim this valuable perk by providing the necessary information about your children on your tax return.
Adjust Your Pay Withholdings
Another effective way to save money on your taxes is to adjust your pay withholdings—if not this year, then during the next. Even a few tweaks can lead to either a larger refund or less money owed when filing your taxes. If you frequently receive large tax refunds, consider reducing your withholdings, yielding larger paychecks throughout the year. However, if you often owe money come tax time, increasing your withholdings can help you avoid unpleasant surprises. To adjust your withholdings, submit a new, adjusted W-4 to your employer.
The key to saving money on your taxes this year is to stay organized and make strategic decisions with your money. By following these tips, you can feel confident about navigating the 2024 tax season and maintaining more control over your assets. As always, make sure that you reach out to a tax professional for tailored advice about your current financial situation.