No one likes to pay high taxes and if you play your financial cards right, you can reduce what you owe each year. There are a few basic steps almost everyone can take to reduce their tax burden and start investing. Every dollar you contribute will lower your Adjusted Gross Income (AGI) and lower your tax bill.
- Matching 401k Contributions. If your employer offers a matching option for your 401k, make sure you contribute up to that amount. For example, if the company matches 5% of your annual salary, contribute at least that amount and you’ll double your money.
- Max Out Your IRA. If you have an IRA and qualify, max out your contributions. For 2018, the maximum contribution is $5,500 or $6,500 if you’re over 50. There are some restrictions based on your income and whether or not you have company-sponsored retirement, but it’s worth checking into.
- Health Savings Accounts. Another two-for-one tax saver is a Health Savings Account. An HSA is different from a Flexible Spending Account typically offered by your employer. It’s like a savings account that works in tandem with a high-deductible health plan. With an HSA, your contributions don’t expire at the end of the year and they accrue interest. This is a great option if you’re self-employed and facing high prices for health care.
- Series I Savings Bonds. US Savings Bonds may not spring to mind when you’re thinking about investments, but they can be an important part of your overall portfolio. They’re tax-deferred for the time you have the bond and grow over time. They can be used as emergency funds or can be used for higher education expenses tax free. The maximum savings bonds investment is $10,000 per Social Security number, and you can add another $5,000 if the money comes from a tax return.
- A 529 Account. Contributions to a 529 account are after tax but when you spend the money, it’s tax-free. It’s a great option for parents who want to put aside money for their children’s college tuition or who are planning to go to college themselves.
Whatever your tax or investment needs, ORT Consulting can help you make the best choices for you and your family. Contact us today at 773-637-8802 or email us at info@ORTConsulting.com.