4 legal tax loopholes to save thousands of dollars in 2020
It doesn’t matter if you file your tax returns for the first time or have done it for years, you can always find out how to prepare them correctly and save a lot of money. There are many strategies or loopholes that you can use to save on taxes, but many regular taxpayers do not use them. Writes about it Grow.
Various methods of saving money recommended by experts, such as depositing to a medical savings account (HSA) or 401 (k), can help you save some money when paying taxes.
According to a Nerd Wallet survey in 2019, in which more than 2000 adult Americans took part, many do not know that some strategies are actually legal.
Four legal and recommended ways to save on taxes this season.
1. Contribute to the IRA for 2019
According to a 2019 survey, many Americans find it illegal to make IRA contributions for a specific calendar year after graduation.
"Surprise: This move is perfectly legal and pretty smart," says Richard Stumpf, a certified financial planner at Financial Benefits Inc.
According to him, you have a deadline before April to deposit money into the IRA account for the previous tax year. This means that you must contribute for 2019 by April 15, 2020 within $ 6000. Just remember to tell your financial institution that you want money to be accounted for 2019, not 2020.
2. Make a contribution to HSA for 2019
If your employer offers a health care expense account (HSA), there is a loophole similar to the one for the IRA. Up to the deadline for paying taxes this year, you can make a contribution that will count towards the previous year.
HSA is a tax account that you can use to pay medical expenses. They have a triple tax advantage: contributions to the HSA are either pre-tax or tax deductible, withdrawals are tax deductible as long as you use them for qualified medical expenses.
“This is one of the best tax loopholes, and you can save a fair amount,” says Stumpf.
In 2020, HSA owners can save up to $ 3 dollars per person and $ 550 dollars per family. If you are making a contribution for the tax year 7, these limits are respectively $ 100 and $ 2019.
3. Check if you are eligible for tax deductions for earned income (EITC)
According to the United States Internal Revenue Service (IRS), approximately 1 out of 5 taxpayers who are eligible for tax deductions for earned income never claims to be.
EITCs are deductions that reduce your tax bill. If you owe $ 3000 but are eligible for a $ 1000 deduction, your tax liability will drop to $ 2000.
If you earned less than $ 56, you are entitled to a tax deduction on earned income. This benefit is for low to moderate income workers and can be up to $ 000.
On the subject: 3 popular tax myths that can cost you money and nerves
Under the category of people who are entitled to payments, taxpayers are US citizens aged 25 to 65 or who have children who meet certain requirements. These requirements are available. here.
In addition, in order to qualify for this deduction, you must also receive income from employment. You can get investment income, but only if the total amount for it does not exceed $ 3500.
4. Make a deposit to your retirement account 401 (k)
401 (k) is a retirement plan granted an employer who allows eligible company employees to save and invest in their tax deferred pension. And if you want to make the most of your tax breaks in the coming year, consider paying 401 (k). Every dollar you invest reduces your taxable income and can save you money next year.
Many Americans will depend on the savings accumulated in the 401 (k) plan or another retirement account, so it is important to start saving as early as possible.
Your 401 (k) is also a surefire way to reduce your taxable income, so the more you invest, the more you save when the tax season comes. For 2020, the maximum limit is $ 19.
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