When it comes to filing taxes and getting the biggest return possible, there are a few unfortunate mistakes that a lot of people make – and before they know it, it’s too late to fix. However, it is never too late to start planning for next year’s tax season, and you can finish the current year strong if you take action soon enough. Here are a few different ways you can start maximizing your next tax return.
Make Donations to Charitable Organizations
Donating to various charities throughout the year will help lower your income taxes at the end of the year. You can deduct not only financial donations, but physical items as well – assuming the charity meets the requirements of being tax deductible. Typically, so long as you aren’t receiving anything in return for the donation, you shouldn’t have anything to worry about. However, it is always a good idea to check with the organization to ensure it is a tax deductible donation.
Invest in a Health Savings Account (HSA)
An HSA account is a really great safety net to have, but it also saves you a lot of money on taxes. Essentially, this account is designed to be used for medical expenses only, but allows you to deposit the money prior to it being taxed. Therefore, as long as you have the money taken right out of your paycheck, and you only withdraw it for medical expenses – it goes completely untaxed.
Increase 401(k) Contributions
Just like the HSA account, any money deposited into your 401(k) account will go tax free. For those unfamiliar, a 401(k) is a retirement plan that you can deposit money into, and typically your employer will match a certain amount that you deposit. This allows you to put even more money away for your retirement, that will not be taxed. There is a limit of $18,000 (increases to $24,000 if you are 50 or older) that you can contribute for the current year, so try to contribute as much of this as you can.
Invest in a 529 Plan
A 529 plan is also like the HSA and 401(k), as it involves money being deposited into an account, right out of your paycheck before it is taxed. These plans are designed to save money for your children’s college expenses, which is a great thing to invest in if you have kids or plan on having kids in the future. Certain states even allow for additional tax credits and/or deductions to those who are utilizing this plan.
Building a Future While Saving Extra Money
The important thing to remember with all of this is that you aren’t just putting money away; you are literally saving dollars that would have gone to taxes otherwise. Not only that, but you’re helping save for you and your family’s future, and in a variety of different ways. Even if you have missed most of the current year, it’s never too late to start saving for the remainder of the current year, as well as 2016 and beyond!