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i have 20000 $ income and want to save on taxes
AI accountant’s answer:
To save on taxes with a $20,000 income, consider the following strategies: 1. Take advantage of available deductions: Deductions will lower your taxable income. As a freelancer or 1099 contractor, you may be able to deduct business expenses like office supplies, mileage for business travel, home office expenses, and more. 2. Contribute to a retirement account: Contributions to a Traditional IRA or a solo 401(k) plan can lower your taxable income. The contribution limit for a Traditional IRA is $6,000 ($7,000 if you're 50 or older), and the limits for a solo 401(k) may be higher, depending on your net self-employment income. 3. Claim eligible tax credits: Tax credits like the Earned Income Tax Credit (EITC) and the Child and Dependent Care Credit can lower your tax bill directly. Check the eligibility requirements for each credit to see if you qualify. 4. Consider the Qualified Business Income (QBI) Deduction: If you're a sole proprietor or have a pass-through business, you might be eligible for the QBI deduction, which allows you to deduct up to 20% of your qualified business income. Remember that the available deductions and tax-saving strategies depend on your specific circumstances, such as your job, location, and individual tax situation. To ensure you've accounted for all possible savings, it's essential to maintain detailed records and stay informed about the latest tax laws.
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