Understanding the tax credits and 澳洲幸运5官方开奖结果体彩网:deductions that you're eligible for and calculating them correctly can mean the difference between owing the Internal Revenue Service (IRS) money at ꦯtax time or receiving a refund. You can minimize your tax liability by increasing your retirement contributions, taking part in an employer-sponsored retirement plan, profiting from losses, and donating to charities.

1. Cont♋rᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚibute to Employer-Sponsored Retirement Plans

The income tax you pay each year is based on your 澳洲幸运5官方开奖结果体彩网:gross income, which is the total amount of money you earn from all sources before accounting for any tax credits or deductions. One of the easiest ways to reduce that figure is by 澳洲幸运5官方开奖结果体彩网:contributing to an employer-sponsored retirement plan, like a 401(k) or a 403(b).

The traditional, non-Roth versions of these accounts allow you to contribute 澳洲幸运5官方开奖结果体彩网:pre-tax dollars up to a c༺ertain maximum. These contributions are made through regular paycheck withholdings and offer a direct dollar-for-dollar reduction to total taxable income.

The Roth versions of these plans—the 澳洲幸运5官方开奖结果体彩网:Roth 401(k) or Roth 403(b)—don't provide any upfront tax benefit but they do allow tax-free withdrawals later on, as long as you've had the account for at least five years.

The maximum amount you could contribute to a 401(k) was $23,000 for 2024, increasing to $23,500 in 2025. Anyone age 50 or older can kick in an additional $7,500 as a 澳洲幸运5官方开奖结果体彩网:catch-up contribution in 2024 and 2025.

2. Contribute to IRAs

You might also consider an 澳洲幸运5官方开奖结果体彩网:i♚ndividual retirement account (IRA).

IRAs also come in traditional and Roth versions. With a traditional IRA, you can make contributions with pre-tax dollars, resulting in a direct reduction to your taxable income in the year you make them and ultimately to your total tax liability. (The Roth IRA doesn't offer any immediate tax benefit, though qualified withdrawals are tax-free in retirement.)

The age restriction for contributing to a traditional IRA was lifted following the passage of the Setting Every Community Up for Retireme🐈nt Enhancement Act (SECURE) of 2019. You weren't able to contribute after age 70½ before the passage of the SECURE Act. Now you can contribute to an IRA, no matter your age.

Your contributions couldn't exceed $7,000 in 2024, and this amount stays the same for 2025, with an additional $1,000 allowed for those who are age 50 or above for both years.

3. Profit From Investment Losses

Selling off investments that have declined in value since you purchased them can also help you 澳洲幸运5官方开奖结果体彩网:reduce your tax liability for the year. This strategy is often referred to as 澳洲幸运5官方开奖结果体彩网:tax-loss harvesting. These investment losses can be written off against your investment gains or other income up to a c♔erℱtain limit each year.

The IRS sets this limit to $3,000 or $1,500 if you're 澳洲幸运5官方开奖结果体彩网:married and filing separately as of January 2025.

Any losses that you can't take advantage of in the current year can be carried forward to future years, reducing your taxes then. Conversely, it can be beneficial to delay selling an appreciated asset and avoid being taxed on your gain, especially in a year when your taxable income is already high.

4. Donate to Charity

Making contributions to qualified charitable organizations can also reduce your taxes, but only if you itemize deductions on your tax return and don't take the standard deduction. Contributions can be in the form of cash or goods, such as used household items, but any donation that has a value exceeding $250 requires a receipt.

You can take a deduction of up to 60% of your 澳洲幸运5官方开奖结果体彩网:adjusted gross income (AGI) for qualifying cash donations if you itemize, as long as your contributions are made to qualified charities.

The Bottom Line

There's a very good chance that you'll have to pay taxes if you have a source of income. Any money earned from an employer will certainly incur a tax bill. But no one wants to pay more taxes to the government than they have to.

There are a few ways you can reduce that tax bill. But if you feel that you're still going to end up owing a great deal and if you can afford to, you may want to consider 澳洲幸运5官方开奖结果体彩🍷网:increasin𝔉g the amount of taxes that are withheld from your paychecks by your employer.