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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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
- 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.
- 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 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.
- 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.