As we approach our golden years, managing our finances becomes extremely important, which means looking for savings everywhere, even our tax bills. While you might be well-versed in standard tax-reduction methods such as paying into a retirement account and contributing to your health savings, many lesser-known tips can help over-fifties reduce their taxable income.
This article outlines several of these lesser-known tips to help people over fifty reduce their tax bill, which can help you meet your tax obligations yet give you more money to enjoy your golden years. From making charitable donations to setting up a college saving fund for your grandchildren, continue reading to see how you could make better financial decisions in your later years.
Contribute To Charitable Organizations
Nowadays, being charitable is a trend that is becoming increasingly difficult to ignore. When we think of giving back, our minds automatically think of donating to charitable organizations like Save The Children Fund and Feeding America, but little do you know that your generous donations can help the less fortunate and reduce your tax bill too.
Your donations can provide significant tax savings, whether cash, furnishings, toys, or even cars, using online car directories like CarDonationCenters.org. If you’d like to find out how much tax you could save by donating your car to charity, consider visiting their website to find out which charities you could help, how much you could save, and more.
Start A College Fund for Your Children/Grandchildren
Another lesser-known way to reduce your tax bill is by starting a college fund for your children/ grandchildren by contributing to a 529 plan. As we all know, college expenses can be mind-numbing at the best of times, so state-sponsored investment plans like the 529 plan were created to make saving for higher education easier for families.
You can use up to $10,000 of your 529 plan per student, per year to fund any college expenses. Although this is dependent on the plan you’re using and any additional state or federal tax benefits that may apply to your circumstances. However, the downside is that this option is only available for over-fifties if you live in any other state than Wyoming!
Look Into State Tax Breaks
If you’ve recently decided to spend your golden years in another state, chances are you’re not familiar with your new state’s federal tax reductions, tax breaks, or credits. So, once you’re settled, don’t forget to look for ways to reduce your tax bill there.
For example, suppose you’ve decided to spend your golden years somewhere warm like Arizona or California, although they might boast similar sunny climates. In that case, it doesn’t mean their versions of tax deductions, credits, or breaks are the same.
If you donate cash, vehicles, toys, etc., to charitable organizations in Arizona, the state will provide you with two separate tax credits. In contrast, in California, residents have their own dependent care and child expenses credit – making it worth looking into depending on your state.
Since they vary depending on where you live, it is worth checking with your local state taxing authorities or a tax advisor to ensure that you don’t miss any tax deductions, credits, or breaks you could qualify for.
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