“Nothing is certain except death and taxes”. Since there isn’t a (legal) way of avoiding taxes, the best possible move would be to approach them in a smart way. So, let’s see how we can save money on paying our taxes.
1) Pay Off Your Debt
Tax refunds are incredibly useful when used correctly. You can use them to pay off your debt faster (and trust us, the way interest works, you should take any help you can get in order to pay off your debt as soon as possible, especially for credit card debt). The sooner you address this problem, the better. Even slight repayments can go a long way since they will reduce the built-up interest over time. Don’t ignore the interest and let it overwhelm you.
2) Create Your Own Emergency Fund
An emergency fund is exactly what it sounds like – a fast cash injection for emergencies. The fund is used to cover any type of problem that arises and needs to be dealt with immediately. Experts say that the amount of money that should be in an emergency fund should always be 3 – 6 months of your living expenses. Using your tax refund for creating an emergency fund is a viable option, that way you get major savings boost. With this fund, if you unexpectedly lose your job or need to pay for an operation, you are covered and can rest easy at night.
3) Small Business Tax Deductions
Small business owners have a few surprising tricks they can do when paying taxes. You can claim operational tax deductions for a variety of things like traveling, business meals, contracting labor, using the car for business purposes, advertising, etc. Not to mention, you can also use the section 179 deduction, which is an internal revenue code that allows you to save a hefty amount of money on property purchases.
Another aspect that you should look out for is employee retention credit. As a result of the pandemic, small businesses have been hit among the hardest. So, countries had to find a way of keeping small businesses afloat during these trying times. One way of doing so is with the employee retention credit, which since 2021 allows eligible employers to receive some much-needed financial assistance in paying workers’ wages along with other things.
4) Invest in Index Funds
Index funds are known for not bringing in the thrills when investing in them. However, because they diversify immediately and charge very low fees, they remain an incredibly smart and safe investment option. People will, usually, look for the stock market or crypt to make a fast investment and see the immediate payback. Anyone who has even a little knowledge of these topics understands that that simply isn’t so. These investments are flashy and dangerous. Meanwhile, index funds take some time to see growth, but they remain the safest investment.
5) Consult a Quantity Surveyor
Even though there are abstract tips always available to those who seek them on the internet, some things can be truly done only in person, with an expert overseeing them. This is why a good way to be smarter about your taxes is by hiring a quantity surveyor to analyze if you can reduce the amount of income tax you need to pay. Aside from that, quantity surveyors will check if there is anything wrong with contracts and whether the obligations have deviated from the said contract as of late. A good quantity surveyor can measure and value completed contracts, cooperate on detailed expenses, and examine plans and specifications for projects. For example, Brisbane Quantity Surveyors are known for their excellent work and lead to effective income stream reductions.
6) Establish a College Fund
For those that have children and grandchildren, you know that securing their future remains a top priority for you. However, in these harder times, it can be incredibly difficult to secure a sufficient amount of money that will always cover a full college education. So, the best way of doing this is by starting a 529 plan. Not only will this cover their future education, but, in some cases, you can also get a deduction from your state income tax.
7) Mortgage Prepayment
Reducing your obligations to the bank is always a good idea. Adding even just one extra payment to your mortgage can save you a lot of pain down the line as well as be a tool for saving money. Since, just like with credit card debt repayment, prepaying mortgages means that the interest will not be as big as time passes and you will lose less effective money.
There are always investment opportunities and ways of being smarter with your money in order to lose less/gain more in the long run, you just have to see them and go for it!