When the Tax Cuts and Jobs Act went into effect in 2018, about 30 million people lost out on itemized tax deductions.
That’s because the bill doubled the standard deduction, and the amount in itemized deductions would be less than the standard deduction.
That doesn’t mean that you can’t learn how to cut taxes. There are many ways to maximize saving on taxes. The tax code changed a little since 2018, and there are more ways to save on taxes because of the pandemic.
Keep reading to learn the best ways to save money on taxes.
1. Property Tax Deductions
One of the most popular tax deductions was the SALT deduction, which means state and local taxes. Property owners could deduct the amount paid in state and local property taxes.
You still claim a SALT deduction, but only up to $10,000, and if you itemize your taxes. This deduction is under debate in Congress.
Pay attention to any changes because they are likely on the way.
2. Business Deductions
If you start your own business, you can claim business tax deductions on your personal tax return, depending on the legal structure of your business.
You can claim deductions for training, operations, advertising, software, and professional services. Be sure to work with someone knowledgeable to help you claim the deductions you’re entitled to.
3. Federal Tax Credits
One of the best ways to save money on taxes is to take federal tax credits. These differ from deductions because they reduce the amount of money owed in taxes.
Deductions reduce your gross income, which is how your taxes get calculated.
You can claim a federal tax credit for home projects, such as installing solar panels or energy-efficient appliances. Additional tax credits might apply, depending on your family status, income, and health care expenses.
4. Charitable Donations
The CARES Act of 2020 allowed charitable donations up to $300 to be claimed on tax returns. Taxpayers didn’t have to itemize to claim the deduction.
Congress extended this in 2021, and the limit for married taxpayers filing jointly was increased to $600.
5. Plan For Taxes
The smartest people aren’t the ones who find loopholes in the tax code. They’re the ones who anticipate taxes and plan for them accordingly.
If you’re going to make a big change in your life, such as purchase a home or start a business, make a plan for taxes.
You’ll always get ahead of them and you’ll maximize your tax refund.
A Guide to Saving on Taxes
Paying taxes is a part of life. That’s how we fund infrastructure and services that benefit the public good.
Fortunately, you don’t have to bear the burden. Saving on taxes is just as important as paying them. Hopefully, you just learned a few ways to take advantage of the deductions and tax credits available to everyone.
Don’t miss out on these opportunities, or you’ll end up paying more in taxes than you should. Be sure to visit this site often for the top lifestyle tips.