Strategies for Year-Round Tax Savings

posted 3/7/2013 in General

Examining your tax strategy could mean more money in your pocket.

Filing your tax return is a once-a-year event, and by using all the best filing practices and claiming every deduction you have earned, you can effectively reduce your tax bill. But managing what you pay in taxes throughout the year may help you have an even smaller tax burden. 

Here are a few strategies from Lincoln Savings Bank to help you see a smaller tax bill come April 15.  Consult your tax professional to determine if these strategies might benefit you!
Get a Raise.From Yourself- a big tax refund is nice, but it may also mean that you're having too much of your hard earned money taken out of every paycheck you get. Recalculate your withholding and fill out a new W-4 with your employer to get more of your money when you earn it.
Start an IRA- if you haven't already. For the upcoming year you can contribute $5,500 to your IRA ($6,500 if you are 50 or over), so why not take advantage of it? Contributions can be made up to April 15th.
Give Your Retirement Savings a Boost- you can reduce your tax bill by reducing your taxable income. Stash some of your money into your 401(k) or similar retirement savings plan because it is not included in your taxable income. For 2013, you can contribute up to $17,500 to your 401(k).
Switch to a Roth 401(k)- while you don't get the tax break for contributions made to a Roth 401(k) like you do for a traditional 401(k), any money taken out of the Roth is tax-free. Taking money out of a regular 401(k) is taxed in your top bracket.
Go for a health tax break- if your employer offers a flex plan, use it. It allows you to put away part of your paycheck for future medical expenses. However, it also allows you to avoid income and Social Security tax on that money, saving you 20-35 percent when compared to spending after tax money.
Pay child care bills with pre-tax money- use a child care reimbursement account if your work offers one. It allows you to pay child care bills with pre-tax dollars, saving you up to one-third the cost because you avoid Social Security and income tax.
These are just a few ways to help lower your tax bill over the year.  Consult your tax professional to find out if these strategies will have a benefit to you.  The financial professionals at LincolnSavings Bank are also available to answer your financial questions, whether you are just out of college, starting a family or working toward retirement. Call or come by any of our branch locations to see how we can help you today!
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