If you’re like most people in New York, you’re always looking for ways to bring down your tax bill, and you can maximize your tax deductions to cut down on how much you end up paying every year. Planning your taxes and the things that you do throughout the year can greatly increase how much you can write off on your taxes.
Know the difference between credits and deductions
Before you dive into all of the ways that you can save on your taxes, you first should know the difference between credits and deductions, which can both help you keep more money in your pocket in different ways. Credits are a particular dollar amount that can be subtracted from your overall tax bill. On the other hand, a tax deduction is something that will reduce the amount of your income that’s taxable.
Top types of tax deductions to log
Trusts, charitable giving, and tax planning can lower your taxes significantly. One of the most important things to do when making charitable donations is to keep receipts for what you give because you’ll need them to show that you made a contribution. For instance, when you donate clothing to your local charity thrift shop, you can deduct the fair market value of those items, meaning that you can take off the value that someone would be willing to pay for them in their current condition. If you give your time to a charity and haven’t been reimbursed for vehicle-related expenses, such as fuel, you can write that off as a deduction, too.
When you’re planning your giving, make sure that you look into which tax year will give you the most value back on your taxes. In fact, working with a tax professional throughout the year will likely help you know when to make large donations, including an old vehicle or a large cash donation.