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Learn How to Avoid These 6 Common Tax Errors

Knowing how you need to file your taxes depends on your income and filing status, as well as which deductions and credits you can claim. In this free ebook, we share some common errors to avoid.

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How can I reduce income tax payments?

How can I reduce income tax payments?

March 29, 2023

There are several ways to reduce your potential current year's income tax liability.  

Contribute to tax-deferred retirement accounts: Contributing to tax-deferred retirement accounts such as a traditional 401(k), traditional IRA, or SEP IRA can reduce your taxable income, and thus your tax liability. Your contributions are made with pre-tax dollars, and you won't owe taxes on the money until you withdraw it in retirement.  

Itemize your deductions: Itemizing your deductions can reduce your taxable income if your deductions exceed the standard deduction. Some common deductions include state and local taxes, mortgage interest, charitable contributions, and medical expenses.  

Take advantage of tax credits: Tax credits can reduce your tax liability dollar for dollar. Some common tax credits include the Earned Income Tax Credit, Child Tax Credit, and the Lifetime Learning Credit.  

Consider tax-loss harvesting: If you have investments that have lost value, you may be able to offset capital gains from other investments by selling the losers and using the losses to reduce your taxable income.  

Maximize your business deductions: If you're self-employed, there are many deductions you may be able to take advantage of, such as home office expenses, travel expenses, and business-related equipment and supplies.  

Gift to charity: Donations to qualified charitable organizations are tax deductible and can help reduce your taxable income.  

It's important to note that the tax laws can be complex, and what works for one person may not work for another. You may want to consult with a tax professional to determine the best strategies for your individual situation.