According to certified financial planners, when Generation X and Millennials learn about income taxes, including any deductions and credits that may apply, it saves them thousands of dollars each year. If you are a Gen X or Millennial, whether you are embarking on your career, managing student loans, starting a family, or planning for homeownership, here are five tips to help you save on your income tax:
Maximize your company benefits.
Many companies provide employee benefits worth an additional 30 percent of pay. Benefits include retirement plans, tuition reimbursements, pretax transportation benefits, health savings accounts, employee wellness programs, and financial planning. Since your company is already paying for these benefits, utilize them to help boost your wealth.
Maximize 401K Contributions
Maximizing your 401(k) contributions is a great way to save. Saving is more effortless when money is automatically deducted from your paycheck and put into a tax-advantaged retirement account. Many companies have plans that start at matching 3% of your income. Once you’ve met the match, you should aim to save at least 15% annually.
According to CNBC Make It, Americans aged 40 through 49 had an average of $105,500 in their 401(k)s as of the first quarter of 2023. Investment data provided to 401(k)’s are particularly tax advantageous because the money contributed from each paycheck is pretax, thereby reducing your taxable income. A 401(k) offers tax-deferred growth, allowing investments to grow without incurring immediate tax obligations.
Prepare a Solid Estate Plan
If you have minor children, drafting a solid estate plan is the most important financial move in your 30s. Make sure to consult with an attorney specializing in estate planning. Your estate should include advance directives, legal and medical powers of attorney, and, most importantly, a will.
Secure Proper Insurance
Similarly, Business Insider recommends purchasing health, homeowners, auto, and disability insurance. Buying life or pet insurance may also be beneficial. Remember to reevaluate your insurance plans yearly to ensure coverage meets your needs and budget.
Pay Down or Pay Off Your Debt
The decade of your 30s and 40s is the best time to pay off any remaining student loan debts and unload any expensive credit cards or other types of debt.
No matter your age, it is never too early to plan. While young, you may think retirement is a long way away. However, it’s necessary to prioritize saving for post-work years so there is enough money for a comfortable future. Seek guidance from a Certified Public Accountant (CPA), a Certified Financial Planner (CFP), and an Estate Planning attorney to secure your future.
Estess CPAs is a professional accountant firm that brings years of experience and reporting standards along with a supporting team of experts. Therefore, your business will gain from improved efficiency, reduced business costs, accurate financial reporting, and tax planning. We proudly serve the Belle Chasse, Luling, and the Greater New Orleans Area. We treat your family like ours and can’t wait to help you improve your operations. Estess CPAs has become an industry-leading tax preparation and advisor firm, offering accounting and bookkeeping services. In addition to helping small businesses run efficiently and save on tax liability, the accounting firm provides a wide range of services, including tax services, accounting, bookkeeping, and payroll services. Free consultations are available by phone, video conference, or in person. To find additional information about Estess CPAs’ services and locations, call (504) 433-5122 (Belle Chasse office), (985) 785-1470 (Luling office), or visit estesscpa.com.
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