No one I know likes to pay taxes. Though when you have to pay taxes, it does indicate you’re making money. So there’s a silver lining in that!
As a law abiding US citizen, I pay my taxes each year. But it doesn’t mean I enjoy it. So I also make an effort to see where I can increase my tax refund (and lower my taxable income). Here’s how…
1. Contribute to my retirement.
Does your employer offer a retirement plan like a 401K, 403B or SIMPLE IRA? Do they offer a company match? In Corporate America, I use to max my 401K contributions each year. If your company offers a match, try to contribute as much as possible to at least get the full match.
If you are a small business owner, you may consider contributing to a SEP IRA, solo 401k or a SIMPLE IRA. All of these plans are great options for lowering your taxable income while saving for your (and your employees’) futures.
Select a SEP IRA if you are a small business owner who wishes to make a tax deductible contribution into an IRA for yourself and on behalf of your employees.
Select a SIMPLE IRA if you are a business owner with a workplace of 100 or less employees and will fund the bulk of their retirement. Choose a solo 401K if it’s just you.
2. Contribute to a health savings account.
I max out my HSA each year for various reasons. If you’ve ever experienced medical bills, you know how important it is to have an emergency fund dedicated solely to medical expenses.
If you have a high-deductible medical plan, you may have the option to contribute to an HSA. The unused contributions can roll over indefinitely and grow tax-free.
Some financial freedom warriors like to use their HSA an additional retirement account. If you don’t want to touch your HSA contributions, then you can pay for your medical bills out of pocket.
Your HSA would then be able to compound tax-free over time. When you turn 65 or are disabled, the IRS allows you to withdraw the HSA money penalty-free.
3. Further my education.
With the ever evolving economy, successful entrepreneurs are lifelong learners. If you took time throughout the year to learn a new skill, you may be eligible for the Lifetime Learning Credit.
The Lifetime Learning Credit is worth a maximum of $2,000 per year, and helps pay for college and educational expenses that improve your job skills.
An eligible educational institution is any college, university, vocational school, or other post-secondary educational institution eligible to participate in a student aid program administered by the US Department of Education.
4. Track my net worth to better manage my cash flow.
If you are trying to achieve financial independence and early retirement, knowing your net worth matters. According to financial advisory firm Personal Capital, the median US household net worth is not sufficient for most investors to realize a comfortable retirement.
Net worth peaks at retirement age for those 65 years and up. House and property values may account for the majority of the net worth calculation.
For younger age brackets, net worth is impacted by holding significant debt such as a mortgage and student loans. In addition, the younger generations typically have lower salaries and less assets. But over time, these investments may result in higher net worth households.
Through Personal Capital, you can also securely link all your financial accounts to get a complete picture of your net worth. Over time, you’ll see if your net worth is trending positively. Then, take steps to make adjustments in your spending and savings habits.
About 1 million people use the Personal Capital app to track and manage their net worth. Start tracking your net worth today!
5. Get the biggest tax refund possible by talking to my CPA Amy Northard.
Tax prep? Bookkeeping? When April approaches each year, I sleep easily knowing that my CPA Amy Northard has already ensured I received the biggest tax refund possible.
Her prices are great for the amount of time and money I save each year! You can check out her latest tax and bookkeeping tips or get in touch with Amy herself here!
Take the stress out of every tax season.
Over the years of running a blog biz, it’s not always easy to be on top of all my business finances. Especially with the constant changes in tax regulations. I was floundering my first tax season and I swore never again to put myself under that much unnecessary stress.
Since then, I’ve been working with a Certified Public Accountant. As mentioned, her name is Amy Northard and I’ve sharing all the great biz finance tips I’ve learned from her throughout my blog.
Amy is a business owner herself! She works with creative entrepreneurs to make taxes and bookkeeping less stressful.
If you need to understand the ins-and-outs of your business financials. Bookkeeping and taxes are not optional. But you’re in luck!
Amy has saved me hours each year on business taxes and bookkeeping! If you are interested in getting support on your biz finances, schedule a free chat with Amy here!