There are many tax strategies that can help reduce your tax bill, some more complex than others. But putting aside money into a retirement account is one relatively easy step that can save everyone money. The step is like a one-two punch — not only are you taking money out of your taxable income but you are also putting it away for use in the future.
How does retirement saving translate to a lower tax bill? If done wisely, a taxpayer can take the money right out of pretax money and put it into a retirement account.
High income earners can take it a step further with additional financial tools. One example is a Cash Balance Pension Plan or Defined-Benefit Pension Plan. A recent piece in Forbes touches on this practice, noting these plans are growing in popularity. Taxpayers that are not interested in these accounts can still take advantage of tax savings by making use of the $18,500 annual contribution limit for 401(k)s.
Are there other easy ways to lower my tax bill? Self-employed taxpayers can also deduct of health insurance and pass-through deductions for qualified business income.
These are just a few examples of tax savings practices taxpayers can use to reduce their tax bill. Navigating these practices and the impact of the new tax law is not an easy task. Those who make a mistake could find themselves the subject of an audit. It is wise to take any contact by the Internal Revenue Service (IRS) about an impending audit seriously. An attorney experienced in these matters can review the correspondence and help better ensure your legal rights are protected during the audit process.