Lower Your Tax Bill With These Last Minute Actions
If you haven’t filed your tax return yet, we have good news: there is still time to lower your bill. When the IRS pushed the filing deadline to July 15, 2020, it moved other deadlines along with it, which could give you the opportunity to take some late steps to reduce your debt or increase your tax refunds.
Make a traditional IRA contribution
If you have a traditional IRA , you can still deposit up to $ 6,000 – or $ 7,000 for people over 50 – by July 15th. The same rules apply for spousal IRAs. If you file your tax return with your spouse, you can contribute to each other’s IRAs even if one of you is not working away from home.
Your tax deduction can be influenced by two factors: your workplace retirement plan and your income. The rules can be a little confusing, but the IRS offers several diagrams to make them easier to understand:
- For a traditional IRA deduction if you have a retirement plan at work.
- For a traditional IRA deduction if you don’t have a retirement plan at work.
Contribute to your Health Savings Account (HSA)
If you had HSA eligible health insurance in 2019, you can also deposit into your savings account by July 15th. The contribution limit is $ 3,500 for individuals or $ 7,000 for family health plans.
Your HSA offers three tax credits: you can deduct your HSA contribution annually; You can invest and multiply money without paying taxes; and when you’re ready to spend it, you won’t have to pay withdrawal taxes on qualified medical expenses .
Calculate business deductions
There is still time for freelancers, independent contractors, gig economy workers, and small business owners to get together with deductible expenses . Some of the major ones may include but are not limited to:
- Health insurance premiums
- Home office deduction
- Internet and cellular bills
- Qualified business income
- 50% self-employment tax
- 50% travel and meals
- Vehicle use
You can read more about business deductions for 2019 here . When in doubt, it is always best to consult a qualified tax professional, such as a Certified Public Accountant (CPA) or Registered Agent (EA). Otherwise, you may have problems later .