Businesses lose more than a chunk of change each year while paying taxes to different authorities. While the sum is justified in many regards, there are ways that an entity can use to bring this huge sum down.
If you have been paying taxes without a second thought on how you can reduce taxable income, this is how you can do so.
One of the most common ways of reducing your taxable income is by opting for either an employer-sponsored retirement plan or an individually held traditional IRA. With the help of 401(k) or a 403(b)-employer plan, you can add pre-tax dollars to your account. As of this year, the maximum amount you can add is around $19,500. People over the age of 50 can add in catch-up contributions, allowing them to put in more amounts.
Newer laws raised the age seniors have also raised the age for required minimum distributions (RMD) from 401(k) and IRA accounts from 70 years to 72 years.
Tax Loss Harvesting
A smart way of reducing your tax liability is selling off those investments that have depreciated since your initial purchase. You can write these off against investment gains or any other income but there’s a limit of $3000 for it. An amount you haven’t been able to use for the current year can be used to reduce taxes in the upcoming years.
Some would suggest waiting out on selling a high-valued asset to avoid being taxed on profits, especially if your taxable income is significant.
Donate to Charity
Rather than opting for standard deductions, many go for deductions on their tax returns. In this case, they are applicable for donations to charitable organizations to reduce some of their taxes. You can either pay them in cash or provide them with some form of item. It’s also recommended to get a receipt from the organization if your donation exceeds $250, otherwise, it will not be considered a valid donation.
Work with a Tax Preparer
Tax preparers are finance experts, having worked across various niches for several years. They have a close on the changing tax code and also look into your past records to find any financial mistakes you’ve been making. A competent professional will suggest various methods by which you can reduce your expenses and increase your returns.
Have you been looking for a way to legally reduce some of your taxes? A professional tax preparer will be able to sort things out for you. Consider acquiring accounting and tax services with Ally Books and Taxes. We offer professional financial reporting and Year End Financial Reporting service, professional tax compliance, tax preparation and planning services, bookkeeping, and GST filing services.
We cater to different niches and industries, keeping track of the latest developments in the finance world. Reach out to us today for your business.