Tax season is the most stressful time for taxpayers. Everyone wants to keep more of their hard-earned money and is worried about overpaying on taxes. While everyone has a different tax situation in Virginia, some effective strategies can help.
For example, taking advantage of tax credits and managing your business expenses can reduce your taxable income and lower your tax bill. Whether you are an employee, self-employed, or a business owner, there are ways to save money on taxes in Virginia.
If you think you are overpaying taxes, a CPA Reston can help you know your available options.
Read this blog more to learn about some of the most effective strategies to save your money on taxes without breaking the law.
Strategies to lower your tax bill
Take advantage of tax credits.
There are many tax benefits available for residents in Virginia. Make sure to claim all the benefits you are entitled to. Since tax credits can lower your tax liability directly, they are more beneficial than deductions.
For example, if your taxable income is $40,000 and $10,000 in tax deductions, your taxable income would be reduced to $30,000.
The American Opportunity tax credit, lifetime earning credit, obtained income tax credit, child tax credit, and credit for dependent care are a few examples of common tax credits.
Contribute to your retirement accounts.
Contributing to your retirement accounts will not only secure your future but also lower your tax bill. You do not pay taxes on the money you contribute to certain accounts. This is because the money is withdrawn from your paycheck before you pay any taxes, which results in lower taxable income and reduces the amount of tax you owe to the government each year.
Contribute to your HSA or FSA.
A contribution to your Health Savings Account can lower your taxable income and reduce your tax bills. Flexible spending accounts are also a great way to save money on taxes and healthcare costs. However, you need to spend the money in the FSA by the end of the year, or you will lose the amount.
Therefore, it might not be a perfect option for everyone. Talk to your financial advisor to know if it is a good option for you. Your employer in Virginia can offer a dependent care FSA, which can be used for your daycare, preschool, and elder care.
Make charitable contributions.
Making charitable contributions can greatly reduce your tax bills. You can donate cash, toys, clothes, and other household items to various charitable organizations that can provide big tax savings. The amount of money you spend on volunteer work is deductible.
It is important to note that your donations are only tax deductible if the donation is made to a qualified nonprofit organization.
Harvest investment losses.
Another effective way to save on taxes is to report your losses on capital investments. This is when you sell some investments at a loss and use those losses to reduce the amount of taxes you owe on your investment gains. This lowers your overall tax bills. Talk to a professional to see if loss harvesting is a good idea for you and your situation.
Maximize your business expenses.
If you are a business owner in Reston, you can use a wider range of tax deduction strategies than individual taxpayers because of tax-deductible business expenses.
Some common business tax deductions include office rent, home office expenses, vehicle expenses, inventory, etc. The lower your net profit, the lower your tax will be. Therefore, make sure to write down as many expenses as possible to reduce your tax bills.
Hire a professional today!
Understanding the tax process can be complex. A professional accountant in Virginia can help you understand the process and provide strategies to save your money on taxes. Hire a professional today!
