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How to Pay Less Income Tax

Follow these five proven tax tips

March 3, 2011
Barbara J. Querry, CPA

1. File an extension if necessary. Make sure you either file your return or file an extension by April 15—even if you can’t afford to pay. Then you will avoid late filing penalties. Everyone is eligible for an extension, which provides six more months to file your return. Although it gives you more time for paperwork, your payment is still due. If you suspect you owe money, pay as much as you can now to minimize penalties and interest.

2. You may be eligible to contribute to a Traditional IRA. You have until April 15 to contribute to a Traditional IRA. This helps you build future security while lowering your tax bill. When it comes to retirement contributions, it’s to your advantage to make contributions sooner rather than later. since you’ll enjoy compound income growth.

3. You don’t need to itemize to take advantage of these above the line deductions.

• If you are a school teacher, you may be eligible for a deduction of up to $250 of certain out-of-pocket classroom expenses.

• Student loan interest of up to $2,500 a year may be deductible.

• Real estate taxes paid on your residence are deductible.

4. Take advantage of tax credits, which offset the tax you owe.

• Did you add insulation to your house? Install energy-efficient windows, doors or skylights? If so, you may qualify for the Home-Energy Tax Credit, which means you get a tax credit of 30 percent of the cost, up to $1,500!

• Did you take a degree or non-degree program to improve job skills? You may be eligible for the Lifetime Learning credit.

• If you are a parent who pays for the care of a dependent under age 13 while you work or look for work, you may be eligible for a tax credit between 20 and 35 percent of qualifying expenses (up to $2,100).

5. Get professional advice. A professional can assure that you are taking advantage of all deductions and credits available to you. If you own a business, a CPA will help you to save tax by claiming all allowable expenses, and ensure your affairs are structured as tax-efficiently as possible. Similarly, if your tax affairs are complex, advice in completing your tax return may well save you money. A CPA understands the business of taxes and can provide trusted advice and service during the tax season and throughout the year.

 
 
 

 

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