Tax Savings for Families

December 16, 2015

There are a number of ways for families to keep their tax bills low at tax time. Here are some moves you could consider making throughout the year to help you:

Work


  1. Give yourself a raise. If you get a big tax refund, it means you are having too much in taxes taken out. File a new W-4 form.

  2. Pay back a 401(k) loan before leaving your job. Failing to do so means the loan amount will be considered a distribution that will be added to your income and taxed.

  3. Ask your boss to pay for you to improve yourself. Companies can offer employees up to $5,250 of an educational assistance tax-free each year.



Home

  1. If you don’t have enough liquid money to give yourself a 20% down payment on your first home purchase, consider using your Roth IRA. You are able to take money out of your Roth IRA tax free for your first home purchase.

  2. Let Uncle Sam help pay for your home. A new home usually means a bigger mortgage. You can adjust tax withholding from your salary to account for the new tax breaks and beef up your take home pay to help pay the bills.



College Savings

  1. Save for college the tax-smart way. Using a Coverdell Education IRA or a 529 college savings plan can provide earnings completely tax free and let you keep control over the money.



Investment and Retirement Savings

  1. Check the calendar before you sell. You must own an investment for more than one year to qualify as a long-term gain and enjoy preferential tax rates.

  2. Make your IRA contributions sooner rather than later. The earlier in the year your money is in the account, the sooner it seeks to earn tax-deferred or, if you use a Roth IRA, tax-free returns.



Your Children

  1. Your children bring tax savings too. A child born or adopted, during the year will add a dependency exemption on your taxes that will knock $3,900 off your taxable income and you may qualify for the $1,000 child credit too.

  2. Tally adoption expenses. Thousands of dollars of expenses incurred while adopting a child can be recouped with a tax credit so make sure to keep records.



To get help with your financial situation, call us at 763-231-9510 or email Katherine@prosperwell.com set an appointment with one of our advisors.

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