Now more than ever, preparing for your financial future is essential and could just save you some money. While you may feel you pay too much in taxes, there is not much of a way to lower your taxes—or is there?
If you dig deep enough, there are many ways to learn how to reduce taxable income. It is not impossible, and all it takes is a little bit of sleuthing.
So, if this sounds like something you need, then here are some effective strategies for how to reduce taxable income for high earners.
Deduct for Your Business
Are you self-employed? Running your own business? Then you can deduct business expenses as one of the ways to reduce taxable income.
Even for part-time self-employment, you can still mark business deductions. Anything you can do to reduce taxable income, you should take advantage of.
You can deduct any of the following expenses:
- business computer and phone costs
- the cost of creating and maintaining a home office
- health insurance
- any other business expenses
Being a business owner or a freelancer of any sort means you can lower your taxable income by taking out business costs when you go to file your taxes.
Max Out Retirement Savings
You can save more for retirement now, and that will help reduce taxable income. You can also check out Wealthability reviews for other ways retired people have money they’d like to invest.
The younger you are and the more you invest into your retirement, the better off you’ll be as you get older. You can watch that amount grow. All it takes is consistency in putting away retirement savings every month.
The more you can put away, the more it will grow as time goes on. This can contribute to reducing taxable income because the more you put away now, the less in taxes you have to pay.
Remember, this only applies to non-employer retirement accounts, such as an IRA (individual retirement account).
Make sure you understand all of what goes into retirement savings accounts. In December 2019, landmark legislation was passed with the SECURE Act. Read up on it so you know for yourself and for your loved ones.
Donate to Charities You Care About
Are you still wondering how to reduce taxable income? Another way is to donate to charities of your choice.
On your taxes, if the charity allows tax-deductible donations, you will have to keep proof of how much you donated and when. After that, it will help your taxable income.
How to Reduce Taxable Income in 3 Ways
Now you have three different methods for how to reduce taxable income. With one or more of these ways, you will lower taxable income more and more.
Are you looking for other content on reducing taxable income? Check out the rest of our website to see what other financial tips we can offer you!