How to Lower Your Taxes

As April 15^th rapidly approaches it's no surprise that people's thoughts turn to taxes, and anticipating how much they may owe, or the size of their refund. Rational people would always prefer to pay as little to Uncle Sam as possible, but how to go about lowering your taxes? Though there are many different ways to lower your taxes, I'll just focus on a few easy (and legal) ways you may be able to do it.

Sadly, the best time to plan for next years taxes is the current year, so you're a bit out of luck for your current years' tax bill, but it's never too early to start thinking about tax planning for next year. Lowering your taxes falls in two general categories - decreasing your income and increasing your deductions, here are some ideas for doing both.

Trying to decrease your income in any given year is easiest for those who have their own business or have the leeway to defer income from this year to the next. But even if you are a statutory employee, your employer may be receptive if you ask to receive your end of year or Holiday bonus in January of the next year instead of December of this year.

If you happen to own your own business, you have a bit more leeway in accelerating deductions and delaying income. Will a client wait until after the new year to pay you? Can you prolong the job to carry over into the next year? Buying supplies or raw materials in December that you'll need for the next year will help offset some income, as will any potential asset or equipment purchases. Contributing to a retirement account for yourself and any employees can also reduce your income in any given tax year. And as always, making sure that you are taking every possible legitimate business expense will ensure that you are paying the lowest amount of taxes that you should.

Increasing your deductions is probably an easier task. If you itemize your deductions, you can increase your deductions by clearing out your closet, garage, or attic and donating the goods to a local charity (make sure they are approved by the IRS, and always get a detailed receipt). And even if you don't itemize, cash donations to some charities can still be deductable. Also do some research and discover if your moving expenses, job hunting costs, or other miscellaneous expenses can be deducted.

Contributing to your Individual Retirement Account (IRA) can lop up to $5,000 off your Adjusted Gross Income for the year. This is one of the few things that you can actually do now to save you money on last year taxes, so if you haven't already done so already, consider making a contribution to your IRA. Contributions must be made before your tax return is filed (typically April 15^th).

Those are just a few ideas of how you can lower your taxes. Not very idea will be applicable to you, and this is not a comprehensive list by any means. Consulting a tax advisor or researching information from the IRS and state taxing authority can give you more ideas on how to lower your taxes.