Five Ways to Lower Your Taxes
With tax day just around the corner, below are a few important changes anyone can make to permanently lower your taxes:
1. Open a 401k. With a 401k, retirement savings contributions are provided (and sometimes proportionally matched) by an employer and grow tax deferred in your name.
2. Open a Spousal 401k. Maximize tax breaks even if there is only one income earner in the family. This can be accomplished by funding a spousal 401k. The breadwinner can contribute to the spouse’s retirement account, thus lowering overall taxes.
3. Use a Roth IRA. By financing a Roth IRA you can decrease your retirement bill. Your account grows tax-free and similarly, future withdrawals are tax-free.
4. Use a 529 plan if you have kids. A 529 plan is a tax-advantaged investment vehicle intended to encourage saving for higher education expenses. If you children plan to go to college, use a 529 plan to lower your yearly tax bill.
5. Open a Health Savings Account (HSA) or use a workplace FSA. By opening a HSA, you can access quality health care at a lower premium cost and defer money for health spending. HSAs work in conjunction with high-deductible plans, therefore, if your plan does not qualify as such, look into your company’s flexible spending account (FSA).
Reference: Gerry W. Beyer, Wills, Trusts & Estates Prof Blog, March 31, 2014.
Filed Under: Business Planning; Tax Planning; Retirement Planning
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