Today is the New Tomorrow: How to Start Saving on Taxes Now

Shutterstock

Everyone dreads tax season—well except for the government perhaps. And although the 2018 filing deadline was just over two months ago, it’s never too early to turn your attention to your 2019 return.

It’s important to keep in mind that how you spend and manage your money today will greatly affect how your money will treat you in the future. Below are a few helpful pieces of advice that can help give you a better perspective on how to approach your taxes.

Take Advantage of Present Conditions

All tax-payers just completed the first year under the new tax bill. 2018 may or may not have treated you kindly, but it could have been worse if it weren’t for the lower tax rates. These tax rates need to be taken advantage of. Not in an illegal sense by exploiting loopholes but by coming up with a thoughtful plan on how to maximize gains.

However, there will be another election in the fall of 2020 and the current lower tax rate may not be so low depending on the result. In fact, some leading analysts predict that taxes may even exceed what they were in 2017. Look to get ahead while you can, because nothing is promised.

Look Into More Tax-Free Income Benefits

Pursuing a Roth IRA will allow you to continuously add to a pool of tax-free income providing you adhere to the set parameters. Although there may be earned income caps on Roth contributions, your limits aren’t based upon your age.

You also aren’t required to contribute a certain amount of money or deposits. A big bonus is if you ever need to withdraw from your Roth IRA, it won’t count as annual income so there’s a strong chance that you won’t need to pay taxes on your social security.

You can also invest in municipal bonds although the stipulations with this type of diversifying are varied. It may require more work than it’s worth to you, but a little research could pay off. Again, take advantage of the current status.

Manage According to Your Tax Bracket

There are 4 specific time periods that are highly influential in how your income is taxed. While you and your spouse are still working, between 60 and 70 1/2, when you turn 70, and when you’re widowed. What you do during these four stages in your life varies greatly in regard to your taxable income.

It’s extremely helpful to understand the pros and cons that exist within these “brackets” so you can make the most informed decision on how to diversify your accounts. The control you have over your money fluctuates throughout these distinct moments. The more you know and understand about their nuances, the better of you’ll be.