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Question
How can I pay less taxes?
AI accountant’s answer:
To pay less in taxes, you can consider implementing various strategies to reduce your taxable income and maximize your deductions, credits, and tax-saving opportunities. Here are some ideas: 1. Contribute to tax-advantaged retirement accounts like 401(k), IRA, or SEP IRA if you're self-employed, as contributions can lower your taxable income. 2. Make sure you're aware of all the tax deductions and credits you're eligible for, such as the standard deduction, itemized deductions (mortgage interest, charitable donations, etc.), Earned Income Tax Credit, Child Tax Credit, Education Credits, and more. 3. Invest in health savings accounts (HSAs) or flexible spending accounts (FSAs) if eligible, as contributions to these accounts are pre-tax or tax-deductible. 4. Time your income and deductions if possible. If you expect your income to be lower next year, you might consider deferring some of your income until then when you may be taxed at a lower rate. Likewise, accelerating deductible expenses into the current year can help reduce your taxable income for the year. 5. Hold onto investments for more than one year to benefit from the lower long-term capital gains tax rates. 6. Consider tax-efficient investments, such as municipal bonds or exchange-traded funds (ETFs), which can have lower tax liabilities. 7. If you have a side gig or freelance work, track your business expenses so you can deduct them from your business income. 8. Keep detailed records and stay organized to ensure you're reporting all deductions and credits you're eligible for accurately. Remember that everyone's tax situation is unique, and these strategies may not apply to everyone. It's essential to assess your financial situation and carefully plan your tax-saving efforts based on your individual circumstances.
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Michael Eaton, CPA
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