Keeping your $ in your pocket

Well, hard-working taxpayers have survived another mid-April “Tax Day”, that lovely day when individual income tax returns are due, because certain Washington, D.C., types feel like we haven’t quite paid enough in taxes already. Alrighty then. Tax Day is a notorious downer, even in the best of economic times, but these days when the economy is still hiccupping big time, it’s a monster pain. However, fear not – now we’re going to start putting some power moves into play that will save you some huge cash come next year. These steps are easy, painless, and will result in a kinder, friendlier tax season next year. No offense intended to the karaoke-loving crew at the IRS, but let’s keep more of your hard-earned money in your pocket, where it belongs!

Step One: Crank up the retirement savings – you’re never too young, and you’re never too old to crank up retirement savings, because whatever your age, the top way to reduce your tax bill is to lower your taxable income. Makes sense, right? You can contribute up to $17,500 to a 401k. That money will not be included in your taxable income – simple as that, and trust me, it adds up. Better still, according to Kiplingers, you can contribute up to $23,000 if you are 50 or older by the end of the year.

Next: Get to know your Uncle IRA – If your workplace doesn’t have a retirement plan, open an IRA. The paperwork is much simpler than you’d expect, and you can contribute up to $5,500 each year. If you really want to go bold and forgo the upfront tax break, go with a Roth IRA instead, which allows you to take tax-free withdrawals in retirement. Nice.

Don’t forget: Healthcare tax breaks — if there’s one thing I’ve learned as a wife, mom, homeowner and business owner, it’s that medical bills can and will come out of nowhere, often leaving financial shock and awe in its wake. Fortunately, many employers offer a medical reimbursement account that lets you put part of your salary into an account that you can then use for those unforeseen (highly likely) medical bills. Best part is that you avoid income and social security tax on the money, saving you anywhere from 20-35 percent or more compared to spending after-tax money. The maximum you can contribute to a health care flex plan is $2,500. Make it happen.

Another tip: Lower child care bills with pre-tax bucks – looking at this from an after-tax standpoint, families are often spending $8,000 or more of their salary to pay $5,000 of child care expenses! Check with your boss to see if they offer a child-care reimbursement account — you use pre-tax dollars to pay childcare bills, saving you anywhere upwards of one-quarter to one-third of the cost, since you’re avoiding income and social security taxes.

For more easy tax-saving strategies, check out great websites like Kiplingers.com, and don’t be afraid to put your bank to work — they’re not just about big wall safes and free lollipops, they’re also stuffed with people who know this kind of thing inside and out. Keep that money in your pocket and make the IRS cut back those karaoke nights even further. Easier on the ears, easier on the wallets. Everyone’s a winner. Frugal On!