Tax planning can be complicated, but there are lots of things in the tax code you can take advantage of to lower your tax bill, even if you have no dependents. Deferring income, itemizing your deductions, contributing to a retirement plan and taking capital losses all have the potential to shrink your tax bill. Since there can be consequences for incorrectly filing your taxes, you might want to work with a tax adviser.
The Internal Revenue Service only taxes you on income you receive during a particular tax year. If you can defer receipt of income until the following year, you can avoid paying tax on it this year. For example, if you are due a bonus at year-end, ask your employer if you can receive it in January instead of December. That way you can defer payment of tax on that income for a full year, instead of having to pay it on your current year's taxes.
The IRS lets you choose between taking a standard deduction or itemized deductions. As of 2012, the allowable standard deduction for a married couple filing jointly was $11,900. However, if you could itemize deductions in excess of this amount, you could lower your tax bill. Common itemized deductions include any state and local income taxes you have paid, unreimbursed business expenses, charitable contributions, mortgage interest and medical expenses exceeding 7.5 percent of your adjusted gross income.
Contribute to A Retirement Plan
If your company offers a 401(k) plan, any contributions you make are tax-deductible, as they are with an individual retirement account or other types of retirement plans. If you are self-employed, you can contribute the lesser of 25 percent of your compensation or $50,000 to a SEP-IRA, with the contribution counting as a deduction on your taxes. For 2012, your retirement plan contributions might also trigger a tax credit of up to $1,000.
Take Capital Losses
If you have any capital investments that have gone down in value, such as stocks, you can use that loss to help lower your taxes. The IRS allows you to offset any gains that you have taken with your losses, meaning you don't have to pay tax on those gains. Additionally, if you have more losses than gains, you can take up to $3,000 off your ordinary taxable income, further reducing your tax bill. While you shouldn't necessarily sell a stock strictly for tax reasons, if you were considering selling the stock anyway, you should take advantage of the loss.
After receiving a Bachelor of Arts in English from UCLA, John Csiszar earned a Certified Financial Planner designation and served 18 years as an investment adviser. Csiszar has served as a technical writer for various financial firms and has extensive experience writing for online publications.