Bobbling Good Health

Anything that reduces your income or maximizes your credits and deductions will lower your tax bill. Now is the perfect time of year to make some moves that can help you minimize your tax liability for this year.

1. Increase your 401(k) contributions. Any money you contribute to a 401(k) lowers your taxable income, plus an extra $5,500 if you’re 50 or older.

2. Make contributions to a flexible spending account. You’ll be making key decisions about next year’s FSA account over the next few months, and you may want to improve your contributions if your employer is increasing your expenses on health care costs for next year as much possible.

3. Apply for economic plan to buy a house. This plan provides a tax credit of up to $8,000 for buying a first home. The credit begins to phase out if your modified adjusted gross income tops $75,000 (or $150,000 if married filing jointly), and it disappears if your income exceeds $95,000 if you’re single (or $170,000 if married filing jointly).

4. Get a new car. The stimulus plan also provides a tax break for new-car buyers. If you live in a state that doesn’t have a sales tax, you still get a tax break if your state imposes a flat fee on the purchase of vehicles or a fee based on the price you pay.

5. Sell Capital losing investments. Capital losses are first used to offset capital gains, and then up to $3,000 of the net loss can be deducted against income, such as your salary.

6. Maximize your tax credits and deductions. Tax credits can lower your tax bill dollar for dollar.  For example, you can deduct if you pay someone to care for your child while you work.

7. Pay college bills. The income limits to qualify have increased, too – from $58,000 to $90,000 if you’re single and from $116,000 to $180,000 if you’re married filing jointly. You can claim the American Opportunity credit in the first four years of college.

8. Charitable Contributions. When tallying up your charitable contributions for the year, don’t forget to count gifts of cash as well as appreciated stock and noncash donations.

9. Self-employed Income. If you’re self-employed or freelance work, you’ll be able to deduct the cost of equipment you use in your business, such as a computer, printer, fax machine and copier, as well as a dedicated phone line, office supplies, business travel and advertising.

10. Medical expenses. It’s worthwhile to keep the receipts of money spent on medical bills in your tax file throughout the year because you could end up with a surprisingly large deduction if you have a medical emergency or a major expense that isn’t covered by insurance.

If you have any doubts about this topics, you can get the best advice from Atlanta tax attorney.