The recent tax reforms changed a lot, closing off old methods of saving but also presenting many new opportunities. There are many different ways for people to save money on their taxes, no financial degree required. This list will show you five opportunities for saving on your taxes under the new laws.
Tax-deferred savings for rainy days
One thing that hasn’t changed (except in a few details) is the ability to save money on taxes by putting as much money as possible into savings vehicles which are tax-deferred. 401k savings accounts are perhaps the best way to take advantage of this, being able to save large amounts and having at least part of your contributions matched by your employer.
Invest in a health savings account
If your employer offers one, a health savings account (HSA) is a great way to save money on taxes and keep your money for emergencies. HSAs offer three types of tax breaks: all the money you put into it is completely untouched by taxes, your savings grow tax-deferred, and withdrawals which are used to pay medical expenses are untaxed.
Donate to charities
Making eligible donations has long been a way to save money on your taxes. The recent tax reform changed some of the specifics of what qualifies as an eligible donation, however, so it is important to become familiar with the changes if you plan to save money using this method.
Start your own business
The new tax laws give some breaks to people that choose to start their own business. By the new laws, sole proprietors using Schedule C or pass-through entities (LLCs, partnerships, and S corporations) get to deduct 20% of their income before filing for their taxes. If a sole proprietor makes more than $157,500, however, they may not be eligible for this deduction.
Invest in alternative energy
Homeowners that install eligible alternative energy equipment in their home can get a deduction of up to 30% of what they paid for the equipment and its installation. Eligible alternative energy includes solar electric systems, solar hot water heaters, wind turbines, and geothermal heat pumps. The 30% starts to drop after 2019, however, so go green soon!