Tax planning in New York isn’t just for the rich. Regardless of your socioeconomic status, there are ways for you to save on your taxes. While you save on your taxes, you could begin investing to improve your socioeconomic status.
Max out your 401(k)
The more you contribute to your 401(k), the lighter your tax burden is. Other tax-deferred retirement accounts like the 401(b) will also reduce how much you owe. Some employers match your contributions, so you’ll want to max out your employer-matched contributions too.
If you want to keep yourself in a lower tax bracket for the year, you might be able to defer income and bonuses to the next tax year. This strategy is helpful when you expect your income to decrease the following year. Self-employed individuals are able to use this tax planning strategy too. They could defer invoices until the next tax year.
Gift tax exclusions
The federal government allows you to donate up to $16,000 per donee without needing to pay a gift tax. This number may change with each tax year, though it doesn’t vary drastically. From 2018 to 2021, it was $15,000. If you directly pay the educational or medical expenses of a donee, then the donation isn’t subject to gift tax. The federal government allows donations to your children as well.
Invest in treasury securities
Capital gains on treasury notes, bills and bonds are exempt from taxes. The tax exemption on this extends to the state and local level.
If you own real estate, you could use the 1031 exchange strategy to avoid taxes. It involves selling a property and using the proceeds to invest in another property during the same tax year.
Staying aware of what deductions you can take and other tax reduction strategies will help you keep more money in your pocket. It also helps you better prepare for retirement and a child’s future education costs.