One of the greatest benefits to working with an experienced accountant is to leverage the potential tax savings that are available. When your accountant has many years of experience working with tax returns, then they can help you maximize your tax savings as much as possible.
Common tax saving methods might include:
- Charitable Giving: Instead of selling your long-term securities and paying taxes on that money, consider donating them instead. You can avoid paying the taxes and still get a charitable tax deduction for the full value of the investments.
- Health Savings Accounts (HSAs): With high deductible medical insurance plans or any situation where you spend a fair amount of money on medical expenses, open a HSA to pay for those medical bills. The contributions into the account are tax deductible, and you can roll the contributions over from one year to the next if the money isn’t used.
- Municipal Bonds: When you earn interest on municipal bonds, the earned interested is tax-exempt.
Here are a few other methods that you might be able to use, click on the links to read more information about each topic:
Home Ownership – Mortgage Interest Deductions: The interest costs on your mortgage can be deducted from your taxes. Additionally, you can exclude a portion of the property gains when the home is sold.
Capital Gains and Losses: Many things that you own can be classified as a capital asset, and selling the asset can result in a capital gain or a capital loss. These gains and losses can be used to on your tax return.
Educational Savings Plans: Options such as 529 plans or a Coverdell Education Savings Account (ESA) can be used to save for future education costs. These plans can be leveraged for tax purposes because the investment growth is tax-deferred and the distributions of the account come out tax-free.
IRA Contributions: The tax benefits of IRAs vary depending on the type of IRA that you choose. Some IRA accounts allow you to take a tax deduction for the contributions, but certain qualifications need to be met.
Roth IRA Contributions: Even though Roth IRA contributions aren’t deductible, meeting certain qualifications on a Roth IRA means that your earnings on the account are tax-free. These plans allow you to contribute a specific percentage of your income each year.