It’s that time of year again when American taxpayers scramble to figure out how much they owe the IRS. Some people might find themselves with an unexpected tax bill or a refund check. If you’re the former, it’s the worst. You didn’t plan for this expense and aren’t prepared to handle it. However, we’ve got a few simple and easy tips to help you start saving on your taxes. Read on.
Tweak Your W-4s
The W-4 is used to tell your employer how much tax to withhold from each paycheck. You’ll need to fill out a new one every year, and you’ll want to tweak the details if you had a huge windfall or if you suddenly got married or divorced. Use the IRS’ withholding calculator to double-check that the taxes taken out of your paycheck are in line with what your tax situation calls for.
Put More Money in Your 401(k)
401(k)s are handy vehicles for saving for retirement. The money you put into a 401(k) is deducted from your paycheck before taxes, which can save you some dough down the road. If your employer offers a 401(k), see if it makes sense for you to contribute a little more every month to get the tax savings and any matching contributions. And if you’re self-employed, consider opening your own 401(k) to chip away at your tax bill.
Start Saving for Your Child’s Tuition
Set aside money for your son or daughter’s college expenses with your state’s 529 plan. Unlike federal 529 plans, these state-sponsored plans are established under the tax laws of the states in which they’re offered. If you choose a 529 in your home state, you may be able to deduct at least part of your contributions from your state income taxes.
Open a Health Savings Account (HSA)
If your high-deductible health plan meets certain requirements, you can take advantage of a tax-free way to save money for medical expenses. A Health Savings Account (HSA) lets you contribute pre-tax dollars on a tax-deferred basis and withdraw those funds without paying additional taxes when used to pay qualified medical expenses.