With the tax season approaching, you might have started feeling the presence of the tax dragon. Thanks to the tax overhaul by the Congress; you would see yourself bidding adieu to some taxes but some new ones have also been sprung on you. However, this does not mean that you would have to pay more. Check out these smart and legal ways which will help you save your precious money this tax season and years beyond.

Make maximum contribution to your tax-deferred savings

Nothing can beat this smart move. With a high contribution limit of $55,000 to $61,000 per year in any tax-deferred programs like the individual 401(k)s and Simplified Employee Pensions (SEPs); you can save a sizeable chunk of taxes merely by contributing maximum to this account.

We know that Adjusted gross income (AGI) is the spine of all tax calculations. The maximum contribution to this fund lowers your AGI and you can easily find yourself falling in a lower tax bracket. Moreover, these make for a winning retirement sum for you to live comfortably afterward.

Contribute to the good old IRA

Individual retirement accounts or IRA is another easy way like the 401(k) though it has some strict rules. If you and your spouse are not participating in any company retirement plan; have an adjusted gross income of less than or equal to $63,000 for individual and $101,000 for couple filing and are qualifying its various other clauses, then this is an excellent avenue. Depending on your age, you can make a maximum contribution of $5,500 and $6,500 to this account and save on your taxes.

Make an extra mortgage payment

One of the most attractive tax benefits enjoyed by homeowners is the mortgage interest deduction. Instead of making your standard 12 monthly payments; make a minimum of one extra payment. It will increase your mortgage interest deduction thereby trimming your tax liability. It would also help you pay off your loan faster.

Check your qualification for earned income tax credit

This option is open to low- and moderate-income taxpayers. Despite its complex rules; it is a terrific option to explore if your yearly income is below $55,000. It is a dollar-to-dollar reduction on your total taxes to be paid. Depending on your annual income, marital status and number of children; it can even take your tax bill below zero which implies that you can expect some refunded money as well.

Max out your HSA contribution

The health saving account is a triple tax break avenue. Contributed money to this account does not attract any federal income tax, state and local tax and finally no FICA tax. With a maximum contribution of $3,400 for individual and $6,900 for families; it reduces your taxable income while also giving you a strong protection against staggering medical expenses in the future.

Make a college savings account

College savings account, either for yourself or your children is a terrific tax-saving avenue. Any money contributed towards tuition is exempted from tax. Thus, you can even pursue any hobby class and can enjoy tax benefits.

Do not pay off student loan fast

We might like to repay back our debts at the earliest but the scene changes with the student loan. Any loan amount paid is exempted from tax and thus you should keep it as long as possible.

Donate tax-wise way

Doing charity is not a good gesture but is also a smart tax-saving way. The assets which are given away attract tax exemption on its fair market value on the date of donation and not its actual price. Thus, it is smarter to donate appreciated stocks or mutual funds as charity instead of cash. This can even relieve you from paying taxes on its profits. But remain cautious about not donating stocks or funds bearing losses. They can be sold and taxes claimed on its losses. The cash can then be donated to charity.

Become an entrepreneur

All ambitious people can consider starting their own business. You can keep plenty of money in company account instead of claiming it as your income. You can also attract higher exemptions as business costs. An expert can guide you to all avenues of saving taxes here.

Go Green

Very few know that by installing alternate energy equipment; they can save taxes. You can get a tax credit of up to 30 percent of total expenditure on qualifying property like the solar water heater systems of the electric systems; wind turbines etc. Even the labor costs are included in the expenditure. Moreover, the tax credit lacks any cap.

Do not procrastinate

Be prepared and ensure to file your taxes as early as possible instead of leaving it for the last minute. This move not only helps get you your tax refund fast but also protects you from any ID theft. This is because of the fact that once a Social Security Number has been filed on the return; it is no longer available for use to the fraudulent.


Hire a Tax attorney

While there is plenty of free software available to help any taxpayer; it is always a smart move to hire a tax expert. They would not only double check for any possible errors which often prove costly but would also explore and exploit all possible tax saving avenues for you.