Strategies to Save on Your Taxes This Year

It’s that time of year again The countdown to April 15 has started, and the deadline to file your tax return looms ever closer. Even after January 1, 2020, there are still some tax-saving strategies you can deploy to lower your 2019 tax bill. After all, who wouldn’t like to save some hard-earned cash and legitimately pay less in taxes? 

Looking for tax-saving tips makes perfect sense. You can help protect yourself from a whopping unexpected tax bill and top up your retirement fund. Or, you may still find ways to include more deductions. With a bit of leg work, form filling, and a calculator, you might just save more that you’d otherwise expect on this year’s tax return. This article aims to cut through the tax jargon and help you find the best strategies to save on your 2019 tax return.

Tax Saving Strategies for 2019 Taxes

1. Check your withholding

The first tax-saving tip on our list is to make sure you’re withholding the right amount of tax. The IRS has a helpful tool you can use that’ll help you uncover if you mistakenly think you owe more in taxes than you actually do. You should do this if you’ve got multiple jobs, seasonal work, claim child credit, or had a substantial tax refund last year. 

So, speak to your employer if you need to make an adjustment. Making sure that your W-4 is correct will save you from paying penalties and interest

2. Contribute to your retirement accounts

It makes perfect sense to slash your tax bill and look after your future at the same time. Remember that you have a limited amount of time to make up your 2019 retirement fund contributions. 

Here are some essential facts about contributing to your retirement fund. 

  • If you have a traditional 401(k) or a Roth IRA, you have until April 15, 2020, to max out on these accounts. The limit this year for a 401(k) is $19,500 and—if you’re under 50—$6,000 to your Roth IRA. 
  • If you have a Keogh or SEP, you can make contributions for 2019 up until October 15, 2020. However, there is no point in waiting. To make your tax return easier and less complicated, contribute to these retirement funds ASAP. 

Contributions to traditional IRA are 100% tax-deductible and will help to lower your tax bill. Roth contributions are not tax-deductible. So, what is the point of these concerning your tax bill? The benefits come when you start receiving your pension. The amount that a Roth IRA or 401(k) earns is never taxed. Withdrawals you make in retirement are also made tax-free. 

3. Keep your files and documents organized

Did you know that being organized is a great way to save on your yearly tax bill, and how does that work? Well, staying organized and keeping all your documents together helps ensure that you’re submitting accurate tax returns. There are several things that good organization an excellent tax-saving tip. Here are just a few:

  • Keeping all receipts for medical expenses, home office supplies, and other deductions can reduce your tax bill—but only if you can find them. So, have an orderly system to file receipts throughout the year. 
  • Filing all financial documents such as mortgage interest statements, investment expenses, and anything tax-related can help submit an accurate tax return. The more legitimate deductibles you can include, the less tax you have to pay.
  • You can avoid paying penalties and interest to the IRS. Late tax returns, missing information, or inaccurate tax estimations can result in huge unexpected bills. 

Having to pay a large chunk of your earnings in tax is painful enough. So, keep everything organized throughout the year. Then, at the end of the year and it’s time to file your return, you might be surprised at how easy it is to fill it out. Getting it done in good time might even save you some money.

4. Itemize your tax deductions

One of the top tax saving strategies for any year is to itemize deductions rather than taking the standard deduction. Of course, this involves some paperwork and time. But the extra work can definitely be worth it—especially when you see how much you could save. 

Before you start itemizing, you need to know what you might save. The standard deduction for your 2019 tax return—the one you have to file by 15 April 2020—is as follows:

  • Single taxpayers: $12,200
  • Filling together with your spouse: $24,400
  • Head of household: $18,350

So, do the math. It’s a no brainer to itemize your return if your deductibles add up to more than the standard deduction. 

What can you include on your deductibles? According to the IRS, your best friends when it comes to filing a tax return are any of the following:

  • Medical and dental expenses
  • Charitable contributions
  • Business-related expenses—home office, travel, and car costs
  • Interest expenses
  • Home mortgage points
  • Losses due to disaster, theft, or casualty
  • Expenses for work-related education

5. Claim for home-office expenses

If you’re self-employed and work from home—even if only part of your business is done at home—you could include some of your household expenses on your tax return. Of course, there are reasonable limits as to what you can claim. For example, you only claim for the part of your home that is used exclusively as a home office.

Let’s say that your spare bedroom is your home office, and it occupies 10% of your home’s floor space. You can write off this percentage as expenses. So, 10% from your rent, utilities, housekeeping, and home repairs—all those may add up to some nice savings. Oh, and don’t forget to include the entire cost of any renovation to your home office space.

Top Tax Tips for Freelancers 

If you’re a freelancer or working in the gig economy, you’ll have more forms to deal with. If you don’t work for an employer—employees receive a W-2 form—you use the 1099 form for tax returns. Clients who paid you more than $600 in 2019 should send you these forms. 

So, at the start of January, you should start receiving these from clients. Your clients also send copies of these forms to the IRS. You use the 1099 forms to complete your tax information. Besides that, you have to include any earnings not included on a 1099. For example, a client paid you less than $600 in the year—they don’t send a 1099, but you still have to report your earnings.

Receipts for business expenses and other deductibles are included in your tax return. Writing off unpaid invoices, claiming for your home office, and equipment depreciation are all ways to save on this year’s tax bill. 

Tax Saving Strategies: A Takeaway

Yes, taxes are one of the two things certain in life. And, like it or not, we all have to pay them. As April 15 looms ever closer, now is the time to get organized. You still have time to top up your retirement fund for 2019 to save on your taxes. Gather together all your tax forms as well as receipts of expenses to include as deductions. Sending an accurate tax return on time is the best way of saving on this year’s taxes.