How to Reduce Your Income Taxes

Posted on October 12th, 2009 by aileen

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A big income tax is like a big hole in your pocket. Don’t be burdened by the amount of money you pay. Here are some steps on how to reduce your income taxes.

Tips:

Get a retirement plan. When your funding a retirement plan, your adjusted gross income is lowered, leading to a lower income tax.
Get a mortgage. Interests are deductible. Having a mortgage also gives you the chance to list down other deductions like estate tax.
A home equity loan will also reduce your income taxes. If you have other debts, like credit card bills or a car loan, you can use your home equity loan to pay off these bills. The interest you pay on your loan is tax deductible.
Your child’s educational expenses can also be deducted from your taxes provided that you’re not using a tax free savings account like a 529 plan.
Having appliances bearing the government’s energy star star rating can also lower your taxes. These items can be deducted from your taxes.
Avoid interests and penalties by making sure you pay your taxes on time. The government may give you penalties if you don’t pay a certain percentage of your income tax in a given year.
Use you stocks to reduce your taxes. It’s always wise to check your portfolio once in a while to see which stocks aren’t performing well. Stock losses may be deductible on your income tax.
Understanding the difference between taxable and non-taxable income will also help you lower your income tax. Once you know the difference of the 2, try to earn more non-taxable income than taxable ones.

Filing for tax deductions should be done on schedule. When you plan to file for a tax deduction, make sure that check your local government’s office for the date of filing. You don’t want to miss the date and not be able to get those tax deductions.