5 Things You Can Do This Year to Save Money on Next Year’s Taxes
It may still be early in the year, but it's not too early to start thinking about your taxes for next year. As much fun as it is to procrastinate, now is the time you can really make a difference in next year's IRS bill. If you plan ahead, you can save a bundle in 2014 using these five simple (and some not-so-simple) ways:
Start a Health Savings Account
If you're young or middle-aged and have concerns about the future of Medicare, it may ease your mind and your tax bill to start preparing now for your own long-term medical needs. If you start a health savings account (HSA), your contributions (to a specific limit, depending on your status and age) are tax-free, as is any interest earned on the account. These can go a long way to ensuring that your future health needs are taken care of.
Start a Roth IRA
Want to save for your retirement, for your kids' college, or to buy a house? A Roth IRA works well for any of these long-term plans. You can withdraw contributions tax- and penalty-free, and depending on when and why you withdraw, part of the interest will also be tax- and penalty-free.
Rent Out Your Home
Do you live somewhere beautiful, popular or interesting? If so, rent out your home! A provision of the law allows homeowners to rent out their residences for 14 days a year tax-free. Perfect for those who just can't stand to stay in their Pasadena residence when the crowds (and traffic) converge for the Rose Bowl.
Make Your Property Green
Feel doubly good about yourself by installing energy-saving appliances in your home this year. The federal government's Energy Star program gives homeowners a tax credit for spending money on certain energy-saving improvements. Wind turbines and solar-powered systems get additional credits, not to mention bringing the beauty of Holland to your backyard.
Move to New Hampshire
The Granite State is beautiful, green, home to good skiing, and it also happens to have no state sales tax or income tax. In fact, the percentage of income that New Hampshire residents pay in taxes is one of the lowest in the country. Live (almost tax-) free or die!