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How to save money by being smart with taxes

Your shortcut to savings!

June 22, 2023
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3
 min read
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Last updated:
Jan 12
A woman sitting at a desk reading from her laptop.

The gist: Unraveling the complexities of taxation, harnessing the power of deductions, and staying ahead with strategic planning can empower you to save a significant chunk of your hard-earned money. 

We've all been there, staring at that gigantic tax form, wondering why tax season feels like wrestling with a grizzly bear in a phone booth. Yes, taxes can seem intimidating. But don't forget the old saying, 'knowledge is power.' Let's roll up our sleeves, put on our tax-savvy hats, and dive into the world of deductions, credits, and exemptions. You might be surprised how this could become your favorite money-saving trick!

Face the Fear

First things first: taxes aren't the enemy—they're a necessary part of our societal structure. They fund public services, build infrastructure, and much more. But let's be real, nobody likes paying more than they should. That's where getting smart with taxes comes into play. It's all about understanding how the system works, leveraging its benefits, and playing by the rules. You can end up saving a sweet little fortune just by being a bit tax savvy!

Unveiling the Magic of Deductions, Credits, and Exemptions

Deductions, credits, and exemptions are like magical tax-saving triplets. They can lower your taxable income, reduce your tax bill, or both. All you need is to be aware of what's available for you to claim. You know what they say: 'In the world of taxes, ignorance isn't bliss—it's expensive!'

The Power of Strategic Planning

If you're only thinking about taxes when the tax season is breathing down your neck, you're probably missing out on many opportunities to save. Planning ahead and adjusting your financial behavior throughout the year can bring substantial tax savings. Remember, the early bird catches not only the worm but also the sweetest tax breaks!

Savings Tips

1. Boost your retirement savings: One of the easiest ways to reduce your taxable income is by contributing more to your retirement savings account. Not only will you thank yourself when you retire, but you can also enjoy a tax deduction now. The exact savings depend on your income and tax bracket, but this strategy could save you up to 22% on taxes. Win-win!

2. Choose solar power: The U.S. federal government’s Investment Tax Credit (ITC) gives homeowners the ability to deduct up to 30% of the cost of installing a solar energy system from their federal taxes. That's a solid reduction on your tax bill and a significant saving on your home running costs, all while helping our planet stay green. Talk about a sun-sational deal!

3. Improve your skills: Under the American Opportunity Tax Credit, you can save up to $2,500 per eligible student (you or your dependents) for the first four years of higher education. Alternatively, the Lifetime Learning Credit allows taxpayers to claim 20% of the first $10,000 spent on eligible education expenses—up to $2,000 credit per tax return. Always dreamt of that MBA or coding bootcamp? Now you've got more reasons to go for it!

In a nutshell, tax savviness isn't a talent you're born with—it's a skill you acquire. And the payoff? Well, let's just say it can be more satisfying than finding money in your old jeans' pocket. So, let's embrace the tax beast, equip ourselves with knowledge, plan strategically, and enjoy our well-deserved savings!

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