Financial Planner Reduce Tax

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Have a Good Financial Plan and Pay Less on Taxes

Other than the most the apparent tax reduction strategies, such as itemizing deductions, there are other options you can choose to reduce your tax bill next year. The trick is to have a good financial plan. If you delay filing your income tax return till it is time, it might be too late for you to benefit from some of the best tax-reducing strategies.

Here are some of the things you should be thinking of early in the year to save yourself money.

Retirement Plan Contributes

Almost any financial planer would ask you to contribute to a retirement plan. Financial planners are right in their advice, because retirement plans offer some of the best tax savings available. Contributions to most retirement plans are tax exempted. The contribution made by both you and your employer will grow tax-deferred until you withdraw them while in retirement. You could look to save between 20% and 40% of your contribution in taxes through retirement plan contributions.

If you're financial planner already has introduced a good retirement plan to you, contributing more early in the year will increase your tax savings and earnings over time.

If your employer doesn't offer a retirement plan, seek help from your financial planner to get an idea as to what retirement plans are available, and how those plans can help you reduce your taxes. Don’t wait until the last minute to roll out your retirement plan. The earlier in the year you make your contribution, the faster it will grow.

Flexible Savings Account (FSA) or Health Savings Account (HSAs)

If your employer offers flexible spending accounts, you can reduce taxes by contributing. This would be a fixed amount deducted from your pay prior to tax calculation and placed in a special account. You can reclaim this money when you submit documentation for medical or dental expenses that weren't covered by your insurance. This can include some co-pays, premiums, and expenses not paid by your insurance policy but are tax department approved medical expenses. Since you will be incurring these expenses anyway, why not do it with tax-free money?

Your financial planner might recommend you open a health savings account. This account similar to a flexible spending account can save you money. To qualify for an HSA, you must be covered by a high-deductible health insurance policy. The money you save on the lower premiums for this policy is deposited in a special account. From this special account you can draw money to pay your medical expenses as they are incurred. You can continue using money form this account until the insurance company starts paying your bills. The maximum you can contribute is equal to the deductible on your insurance policy. The difference between a traditional medical spending account and a HAS is that you get to keep any contribution made till your retirement and your contribution grow tax-free.

Plan Your Charitable Contributions

When preparing your financial plan remember that contributions made to recognized charities are exempted from tax. You can save some money on tax by giving clothes or household items you no longer use to charities like the Salvation Army or Goodwill.

Make sure that you give your donations before the end of the year. Make a list of the items you donated and assign a price. Think how much you would pay for such used items at a yard sale. There are tax department guidelines as to how much can be claimed for commonly donated items. Remember to get a receipt from the charitable organization to which you gave your donation.

Take Advantage of Lower Long-term Capital Gains Tax Rates

If you plan to sell a capital asset, such as stock or other investment, make sure you had it for more than a year. When selling capital assets, if you held it for more than a year you can take advantage of the lower long-term capital gains rates. Proceedings from any capital assets sold before that will be subjected to ordinary income tax rates.

Not all assets qualify for the lower capital gain rate, so check with your financial planner or the tax department.