Monday, March 31, 2014
With tax day just around the corner, below are a few important changes anyone can make to permanently lower taxes:
- Open a 401k. With a 401k, retirement savings contributions are provided (and sometimes proportionally matched) by an employer and grow tax deferred in your name.
- Open a Spousal 401k. Maximize tax breaks even if there is only one income earner in the family. This can be accomplished by funding a spousal 401k. The breadwinner can contribute to the spouse’s retirement account, thus lowering overall taxes.
- Use a Roth IRA. By financing a Roth IRA you can decrease your retirement bill. Your account grows tax-free and similarly, future withdrawals are tax-free.
- Use a 529 plan if you have kids. A 529 plan is a tax-advantaged investment vehicle intended to encourage saving for higher education expenses. If your children plan to go to college, use a 529 plan to lower your yearly tax bill.
- Open a Health Savings Account (HSA) or use a workplace FSA. By opening an HSA, you can access quality health care at a lower premium cost and defer money for health spending. HSAs work in conjunction with high-deductible plans, therefore, if your plan does not qualify as such, look into your company’s flexible spending account (FSA).
See Mitch Tuchman, Lower Your Tax Bill For Life, Forbes, March 27, 2014.