With the tax deadline day approaching, I thought this was an important topic to share with you today. Because I learned firsthand how you can lower your tax bill. These are actionable steps you can take to seriously move the needle for your 2023 tax bill….(read more)

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As we welcome the new year, it’s the perfect time to start planning ahead and set a goal to lower our tax bill for 2023. It’s no secret that taxes can take a significant chunk out of our income, so here are some tips to help you reduce your tax bill and keep more money in your pocket.

Maximize your Retirement Contributions

Contributing to your retirement accounts such as 401k, IRA, or Roth IRA can be a great way to save for the future and reduce taxable income at the same time. For 2023, you can contribute up to $19,500 to 401k or similar plans and an additional $6,500 if you are 50 or older. IRA contributions are capped at $6,000 with an additional $1,000 catch-up contribution for those over 50.

Consider Tax-Efficient Investments

Investing in tax-efficient investment vehicles such as exchange-traded funds (ETFs) or municipal bonds can help reduce taxes on investment income. Unlike traditional mutual funds, ETFs usually have lower annual taxes because they trade infrequently, which means less capital gains to the investor. Municipal bonds are exempt from federal taxes, and if you live in a state that taxes income, they may also be exempt from state and local taxes.

Donate to Charity

Charitable donations can be a beneficial way to reduce your taxable income while also supporting a cause that you care about. Donations can be made in various forms such as cash, stocks, or goods, and most charities are recognized as tax-exempt organizations, meaning donations can be tax-deductible.

Keep Accurate Records and Receipts

Keeping track of all your expenses, especially those that are tax-deductible, can save you a significant amount come tax season. Business-related expenses, medical costs, and charitable donations are just a few of the expenses that can be deducted if you have documented proof. A good rule of thumb is to keep receipts or records for any expense that you think might be deductible.

Use a Tax Professional

If you’re finding tax planning overwhelming or are unsure of how to navigate the tax code, consider hiring a tax professional. A tax professional can help you identify ways to reduce your tax bill and ensure you’re following proper tax practices. They can also help you plan strategically for the year ahead and ensure that you remain compliant with the tax law.

In conclusion, lowering your tax bill in 2023 requires planning and preparation. By maximizing your retirement contributions, making tax-efficient investments, donating to charity, keeping accurate records, and seeking professional help, you can reduce your tax bill and save more money. Don’t wait until tax season to start planning; the earlier you start, the better chance you’ll have to minimize those tax obligations.