Tax Planning Strategies For 2021 Tax Year With Mistakes To Avoid

If you track your spending; you will notice that often taxes are the biggest expenses.

Because most taxes are usually deducted at source; we do not notice the huge bite taken by the government.

While one cannot avoid paying taxes; you should take all the necessary legal steps in order to minimize paying taxes via year end tax planning strategies.

Pre-tax Retirement Contributions Max out your Pre-tax retirement contributions since this is the easiest way to reduce your taxable income.

Tax Planning for Individuals

Health Savings Account (HSA) HSAs (health savings accounts) are triple tax advantaged. The contributions are exempt from tax, the account grows tax deferred and you receive tax-free distributions when used for medical purposes.

Flexible Spending Account (FSA)

The advantage of FSA is that the payroll deductions avoid both income and Social Security taxes

Commuter account You can set aside the monthly cost of your commute before taxes in a Commuter benefit account.

Deferred Compensation Plan

Depending on your level in the organization you might have the option to enroll in Deferred Compensation Plan.

Deferred Bonus You can ask for your year end bonus to be deferred and paid next year. This could reduce as well as defer your tax.

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