10 Tips for How To Reduce Your Tax Payments

Contribute to a 401(k) or other retirement account: Contributions to certain retirement accounts, such as 401(k)s and Traditional IRAs, may be tax-deductible.

Take advantage of tax credits: Tax credits can directly reduce the amount of tax you owe. Examples include the Child and Dependent Care Credit and the Earned Income Tax Credit.

Keep track of your deductions: You may be able to claim deductions for certain expenses, such as charitable donations, student loan interest, and business expenses.

Consider your filing status: Your filing status, such as single or married filing jointly, can affect your tax rate and the deductions and credits available to you.

Plan your charitable donations: Donating to charities can be a tax-efficient way to support causes you care about. Consider grouping your donations in a single tax year to claim a larger deduction.

Utilize the standard deduction: The standard deduction is a fixed amount that reduces the income subject to tax. For the 2020 tax year, the standard deduction is $12,400 for single taxpayers and $24,800 for married taxpayers filing jointly.

Defer income to a later tax year: You may be able to reduce your tax bill by deferring income to a later tax year. For example, you might consider delaying the receipt of a bonus or postponing the sale of investments until the following tax year.

Consider a Health Savings Account (HSA): Contributions to an HSA may be tax-deductible and can be used to pay for certain medical expenses.

Take advantage of the home office deduction: If you work from home, you may be able to claim a deduction for a portion of your home expenses, such as utilities and mortgage interest.

Seek professional advice: A tax professional, such as a certified public accountant (CPA), can help you identify tax-saving opportunities and ensure that you are in compliance with tax laws.