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Salary Income Tax Tips
None of us like paying our hard-earned money is taxes. However, we have to. The good news is that there are many salary income tax saving tips that you can follow to reduce the amount of taxes you pay on your salary. Though, you have to understand that there is no escaping from income tax. |
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A point to remember is that any income you do not receive until after midnight on New Year’s Eve is not taxed until the following year. Now how can this benefit you? Well, you are putting off paying your income tax by 365 days or a full year.
However, there is no way of telling your employers to postpone your salary. You just cannot ask your employer to hold on to your December paycheck until January. But you can adopt various tips listed below to help you save your income tax.
Salary Income Tax Tips
It is very simple and easy to save money on taxes. If you look around, you will find many avenues that will help you save taxes on your salary.
- Opening an IRA account for your non-working spouse is a good way of saving taxes. You are allowed to contribute up to $2,000 a year in an IRA. A traditional IRA is not completely tax deductible if you are in your employer’s retirement plan. So by opening one for a non-working spouse allows you to put away $2,000 pretax.
- Convert your traditional IRA to a Roth IRA. If you do this, you will pay tax on the balance based on your bracket because Roth IRAs are funded by after-tax money. If your holding decreases in value, you can always recharacterize your Roth IRA back to a traditional IRA.
- You can donate appreciated assets to a charity. This can be done instead of selling and donating the after-tax proceeds. The savings can be significant depending upon how much capital gains taxes you would have paid on the sale of your appreciated assets.
- Plan for your children’s college education by contributing at $500 to an education IRA for each child who is under 18. The earning in an education IRA grows tax-free but if your use the money for non-educational purposes, you would have to pay a 10 percent penalty.
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