What are ways to cut the taxes?

Most popular question asked by common person!

Here is the list of things which may help to reduce the income taxes. It is NOT necessary that those apply to your case.

1. Invest in retirement accounts - 401k, Traditional IRA but remeber tax is deferred not eliminated.
2. Buy home and deduct mortgage interest deduction, & real estate tax deduction.
3. Get generous, donate your clothing and household items to charity.
4. Instead of short term capital gain, make it long term capital gain by holding security for 12 months or more.
5. If you want to avoid state taxes completely, then move and start working in states like Florida where there are no state taxes.
6. Use your employer's Flexible spending account benefit (if any) for any medical or dental or dependent care cost. Here you may save your tax percentage of the cost.
7. Pay your mortgage payment of next year's first month early. (eg. instead of 1 Jan, pay 31st Dec). This way you can get deduction in current year.
8. Pay real estate taxes early.
9. You can deduct Medical expenses only if it exceeds 7.5% of your adjusted gross income (AGI). So have calculated planning of your Dental & Medical expenses from start of the year to get this deduction.

NOTE: You may be subject to AMT. If AMT applies to you then many of above ways will not reduce your taxes.