Discover legal ways to save money on your taxes in 2010.Like what you hear? Help us out by writing a review at iTunes. Questions go to money@qdnow.com. Thank you!
Money Girl
159 MG Five Best Ways to Save Money on Taxes
Hey, Fidelity. What's it cost to invest with the Fidelity app? Start with as little as $1 with no account fees or trade commissions on US stocks and ETFs. Hmm, that's music to my ears. I can only talk. Investing involves risk, including risk of loss. Zero account fees apply to retail brokerage accounts only. Sell or assessment fee not included. A limited number of ETFs are subject to a transaction-based service fee of $100. See full list at Fidelity.com/commissions. Fidelity brokerage services LLC member NYSE SIPC. After investing billions to light up our network, T-Mobile is America's largest 5G network. Plus, right now, you can switch, keep your phone, and we'll pay it off up to $800. See how you can save on every plan versus Verizon AT&T at tmobile.com/keepandswitch. Up to four lines via virtual prepaid card, a left 15 days qualifying unlocked device credit service ported 90-plus days with device and eligible carrier and timely redemption required. Card has no cash access and expires in six months. Hi everyone, and welcome back to Money Girl's Quick and Dirty Tips for a richer life. I'm Laura Adams. This podcast is the last in our five-part series about taking charge of your finances in 2010. Each episode in the series has been about a pillar of personal finance, setting goals, saving, investing, and being properly insured. Today's show is about how to legally cut your tax bill. If you're like many people who work for an employer, you may not know exactly how much you pay in taxes each year. Of course, you know that taxes are deducted from your paychecks and that you may be eligible for a refund at tax time. But do you realize that taxes are probably your largest expense? As they take such a huge bite out of your income, it's smart to reduce them in every way possible. Now, I'm not suggesting that you do anything illegal to avoid paying taxes, but even the IRS encourages people not to pay more in taxes than the law requires. So how do you actually reduce taxes without skirting the law? Here are the five best ways. Strategy number one, adjust your withholding. Many people have too much federal tax withheld from their paychecks. You're in that boat if you receive a large tax refund each year. I know it seems counterintuitive, but receiving a tax refund never helps your finances. Consider this, when you file a tax return, you're really just settling up with the government. If you didn't pay enough during the year through payroll deductions to cover your tax bill, then you have to pay the difference on tax day. Or if you overpaid your tax bill, you get a tax refund for the excess. So receiving a tax refund is simply an indication that you handed over way too much money to the government. Instead, you should have received that money and put it to work earning a nice return in a retirement or savings account, receiving a higher paycheck now, rather than getting a tax refund in the future, doesn't actually lower your tax bill. But it does give you an instant pay raise so you can control more of your hard-earned money. You adjust your withholding by completing Form W4 and submitting it to your employer anytime during the year. The W4 can be confusing, so get some help with it by using the withholding calculator at irs.gov. The second strategy to lower your taxes is to take tax credits. Tax credits are one of the most powerful ways to lower your taxes because they reduce your actual tax bill dollar for dollar. It's like going to the grocery store with a $3 coupon if your total bill is $75 using the coupon means you only pay $72. Well, tax credits slash the amount of tax you owe in the same way. Be sure to go to the blog at moneygirl.coicandertietips.com where you'll find links to 10 tax credits as well as each of the tax forms that I mentioned in the show. Strategy number three is to take tax deductions. A tax deduction is an amount that the IRS allows you to subtract from your taxable income, such as charitable contributions, student loan interest, and certain IRA contributions. When you reduce your taxable income, you also lower your tax liability. For example, if your taxable income is $40,000 but you're eligible to claim $10,000 in allowable deductions, then you only have to pay taxes on $30,000. The best way to see every allowable deduction is to review Schedule A of Form 1040 because that's where you claim itemized deductions. There's also an instruction sheet for Schedule A which gives you details about each of the deductions. Category four, contribute to tax-deferred retirement accounts. Retirement accounts like traditional IRAs, workplace 401(k)s, and Kios, which are for the self-employed, are great ways to lower your tax bill. That's because you don't pay tax on the money you contribute to them until you withdraw it in the future. That doesn't eliminate the tax, but you defer it for many years. September is a great month for planning. We start thinking about the rest of the year, whether it's back to school, big year-end work projects, holiday plans or travel, planning ahead is crucial in life, especially when it comes to what happens when you're gone. Getting life insurance may sound daunting, but policy genius makes the process a breeze. With policy genius, you can find insurance policies that start at just $292 a year for a million dollars of coverage. Some options offer same-day approval and avoid unnecessary medical exams. Policy genius's technology lets you compare quotes from America's top insurers in just a few clicks to find your lowest price. It's the country's leading online insurance marketplace. And if you ever need help or guidance, they have an expert license support team to answer your questions, handle all the paperwork, and advocate for you throughout the process. It's never too late to plan ahead. Go to PolicyGenius.com or click the link in the description to get your free life insurance quotes and see how much you can save. That's PolicyGenius.com. After investing billions to light up our network, T-Mobile is America's largest 5G network. Plus, right now, you can switch, keep your phone, and we'll pay it off up to $800. See how you can save on every plan verse for "Isin' An AT&T" at T-Mobile.com/KeepAnSwitch. Up to four lines via virtual prepaid card, a left 15 days qualifying unlocked device credit service ported 90+ days with device and eligible carrier and timely redemption required card has no cash access and expires in six months. The new John Deere Gator SUV lets you cut, pack, drive, weld, pull, load, tow, spray, and haul all in a single day with the highest cargo box volume in its class. You just have to get in the seat. Learn more at your John Deere dealer. And strategy five is to use health spending accounts. There are several programs created to help offset the growing cost of healthcare. With savings accounts, flexible spending arrangements, and health reimbursement arrangements all allow you to pay for certain medical expenses with tax-free money and can be combined with a high deductible health plan in some cases. If you are eligible for one of those tax-favorite accounts, don't miss the opportunity to save taxes by spending pre-tax money on qualified healthcare or childcare expenses. Take a look at IRS Publication 969 for complete information. Before I go, I want to remind you that each year the IRS ends up with millions of dollars that it tries to refund tax payers. If you moved recently, it's a good idea to complete an address change form that's IRS Form 8822 to make sure your money follows you. Or better yet, set a tax refund up for direct deposit into a special account. Like your health savings account, retirement account, or bank savings account, you can even split it up between multiple accounts by completing IRS Form 8888. Again, remember that there's lots more information on the blog at moneygirl.quickendirtytips.com. And thanks to everyone who's downloaded my newest audio book, Money Girls 10 Steps to a Debt-Free Life, get your copy today at audible.com, amazon.com, or in the iTunes store. It's a great way to support the podcast and to get on the road to a better financial future. You can always send your email comments or questions to me@money@quickendirtytips.com. I'm glad you're listening. Cha-ching. That's all for now. Courtesy of Money Girl, we're going to a richer life. Calling all future shapers and dream chasers MSU Denver is a place that meets your pace. We have drive and dedication to help you reach your destination. We're a school that works for you and with you at every step. Online and on campus, learn with faculty and peers to forge a career. Tomorrow can't wait. Your next starts now. We are the changemakers. MSU Denver. Introducing Wendy's new saucy nugs, the nugs you love covered in your favorite sauces. So no matter what flavor you're craving, Wendy's has you covered. Grab Wendy's new saucy nugs today. Open till midnight or later. At participating US Wendy's, ours may vary by location. [BLANK_AUDIO]