An unexpected tax bill can ruin your entire planning for the year. After all, we all need money to sustain ourselves in this money-driven world.
Now, while you already have planned your entire year, and then if you get a huge tax bill, it will turn everything upside down.
That is why you need to consult with the best Tax Attorney and take their help in cutting your taxes off. Here in this article, we will talk about different ways to cut your tax bill this year.
Tips To Cut Your Tax Bill This Year
Here are some tips that you can use to cut off your tax bill.
Tweak Your W-4
You can give your employer a W-4 form and instruct it on the amount of tax to withhold from every paycheck.
- In case you got a huge tax bill and do not want any surprises next year, it is best to raise withholding, so you owe less when it is time to actually file your tax return.
- Also, in case you get a huge refund, you need to do the opposite and reduce your withholding. Or else, you might be needlessly living on less of your paycheck all year.
- In addition to all these, you are always eligible to change your W-4 and how it works.
Contribute To An IRA
There are basically 2 major types of IRA or individual retirement accounts.
- Traditional IRAs.
- Roth IRAs.
You might be able to deduct contributions from a traditional IRA. But, the amount you can deduct depends completely on whether you or your spouse is covered by any type of retirement plan at work and also the exact amount that you make.
- Here, for the tax year of 2021, you might not be able to deduct your contributions by any retirement plan at work, you are filing jointly, and you are obviously married. Also, your modified adjusted gross income was a minimum of $125,000. Now, in 2022 the number has increased to $129,000.
When it comes to putting money in an IRA, there are some limitations as well.
- For both 2021 and 2022, $6,000/ year is the limit here; for people age 50 or older, the amount is $7,000.
- In order to fund your IRA for the previous tax year, you have time till you file your tax. That means you are getting extra time to take advantage of the strategy.
Stash Money in your 401(K)
The less the taxable income will be, the less your tax will become. And the 401(k)s are one of the most popular and effective ways to reduce your tax bills. The IRS never taxes what you are diverting directly from your paycheck into a 401(k). A Tax Attorney will help you to get a complete insight into it.
- In 2022, you can funnel upto $20,500 every year into your account.
- In case your age is 50 years or more than that, you also can contribute an extra $6,500 in 2021 and also in 2022.
- All these retirement accounts are generally sponsored by employers. But self-employed people also can open their own 401(k)s. Alos, in case your employer matches all or some of your contributions, you will get free money to boot.
Fund Your FSA
The IRS always allows you to funnel tax-free amounts directly from your paycheck and that too in your FSA each year. So, in case your employer is offering you a flexible spending account, you might wish to take advantage of it in order to lower your tax bill of yours.
- In the year 2021, the limit was $2,750. However, in 2022, the amount has increased to $2,850.
- To be practical, you will get the money during the calendar year for dental and medical expenses. In addition to that, you also may be able to utilize the amount for related everyday items, like pregnancy test kits, acupuncture, bandages, and breast pumps for yourself and also for your qualified dependents.
- At the same time, several employers might allow you to carry the amount over to the next qualified year.
Get Help From An Tax Attorney
Although we have discussed all the major ways of cutting your taxes this year, we will always recommend you to take some serious advice from some professional. Here, an experienced Tax Attorney will be able to help you with all the necessary information and experienced guidance.