How to Reduce Tax Bills
Tax bills need to be paid each year based on your income in the precious year. You can reduce your tax bill by decreasing the amount of taxable income, using deductions and tax credits. When you cut your taxable income you may end up in a lower tax bracket, resulting in a lower tax bill.
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Instructions
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Determine how much you are contributing to a 401K or an Individual Retirement Account. Increase the percentage that you are contributing each week from your paycheck to either of these retirement accounts. Contributions are tax deductible and will lower your taxable income.
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Itemize the deductions you are claiming on your tax return. Allowable deductions such as medical and dental expenses, taxes you have already paid, mortgage interest, and job expenses, along with other miscellaneous deductions, can lower your tax bill.
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Take advantage of tax credits available from the federal government. These include the tax credit for first-time home buyers that was extended through September 2010, and “green” energy tax credits.
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Adjust the amount of tax withholding from your paycheck. Although your total tax payout won't be less, the more taxes you withhold from your paycheck the lower your tax bill will be at the filing deadline. And you may even get a refund.
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Determine if you have stock market losses. Shares of stock that are sold for a net loss may qualify you for a $3,000 deduction ($1,500 for single filers). Unused stock losses can also reduce your tax bill in subsequent years.
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Make charitable donations. Obtain receipts for the donations so the money you've given can be a documented tax deduction.
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